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New Jersey Trial Court Holds Storm Surge Not Subject to Flood Sublimit Where Policy Expressly Includes “Ensuing Storm Surge” in Named Windstorm Coverage

In recent years, many courts have held that storm surge is a species of excluded flood loss; we reported on a New York example in July.  This week, in Public Serv. Enter. Group, v. ACE Amer. Ins. Co., 2015 WL 1428370, Unpub. LEXIS 620 (N.J.Super., Mar. 23, 2015), a New Jersey trial court granted summary judgment to Public Service Electric & Gas (PSEG) and held that the flood sublimit did not apply to a claim for Superstorm Sandy loss from storm surge where the contracts of insurance specifically recited that coverage for a “named windstorm” – which was not subject to any sublimit  –  included “ensuing storm surge.” Eight large PSEG generating stations and a number of smaller distribution facilities

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Posted in Causation, Efficient Proximate Cause, Ensuing Loss, Flood, Superstorm Sandy, Windstorm

Iowa’s Highest Court: Damage by Rainwater is Damage by Rain

Last July, we posted that an intermediate level appellate court in Iowa had held that a policy excluding loss “caused by rain” did not bar coverage for loss occasioned by the non-excluded peril of “rainwater.”  On Friday, the state’s highest court threw cold water on such nonsense, holding that there was no distinction between rain and rainwater for coverage purposes.  No justice disagreed, though the court split 4-3 on another issue.  The decision can be found at Amish Connection, Inc. v. State Farm Fire & Cas. Co., 2015 WL 1260085, 2015 Iowa Sup. LEXIS 32 (Iowa, Mar. 20, 2015). The insured operated the Amish Connection Store in Crossroads Shopping Mall in Waterloo, Iowa.  Rooftop drains discharged into a 4” cast-iron

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Posted in Anti-Concurrent Causation, Corrosion, Ensuing Loss, Flood, Water

New York’s Highest Court Enforces a Water Damage Exclusion Despite an Ensuing Loss Exception

In Platek v. Town of Hamberg, et al., 2015 WL 685726, 2015 N.Y. LEXIS 252 (N.Y., Feb. 19, 2015), the New York Court of Appeals held that an exclusion for water below the surface of the ground was unambiguous and operated to bar coverage when a subsurface water main burst and flooded the insureds’ basement.  The policyholders’ attempt to invoke an ensuing loss exception to the exclusion was also rejected in an opinion that surveys the historical genesis of ensuing loss provisions and explains the limited circumstances under which they operate to restore coverage. The insureds, Frederick and Mary Platek, owned a home in Hamberg, New York.  On September 7, 2010, a subsurface water main abutting their property ruptured, flooding

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Posted in Ambiguity, Burden of Proof, Ensuing Loss, Explosion, Flood, Water

Second Circuit Affirms a Southern District Decision Construing “Covered Location” Narrowly

In January, the Southern District rejected an insured’s $2 million claim for a generator destroyed by Superstorm Sandy.  The unit was in the basement of an office building in lower Manhattan, but the contract of insurance defined “covered location” to mean the 33rd floor of the structure.  The district court rejected the policyholder’s argument that language insuring personal property “in buildings or structures at a ‘covered location’ “ extended coverage to the entire building including its basement.  On October 16th, a panel of the Court of Appeals affirmed this carrier-friendly interpretation in Jane Street Holding, LLC v. Aspen American Ins. Co., — Fed.Appx. –, 2014 WL 5287051, 2014 U.S. App. LEXIS 19905 (2d. Cir., Oct. 16, 2014). Jane Street Holding,

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Posted in Flood, Insured Premises, Superstorm Sandy, Water

Oklahoma Supreme Court Reconciles Sewer Backup Exclusion With Accidental Discharge Coverage Grant

In May, we reported that a New York court had found that a policy containing both an exclusion for water that backs up through sewers and drains and a coverage grant for accidental discharge or overflow from a plumbing system was neither internally inconsistent nor ambiguous in nature.  The post can be found here.  On June 17th, Oklahoma’s highest court agreed, albeit without citing the New York case, and it held that the two provisions were fully reconcilable and enforceable.  The case in question is Porter v. Oklahoma Farm Bureau Mut. Ins. Co., 330 P.3rd 511, 2014 Okla. LEXIS 72 (Okla., June 17, 2014). Justin and Brandy Porter owned a home that was damaged when raw sewage entered the premises

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Posted in Ambiguity, Flood, Seepage or Leakage, Water

In Iowa, Rain is What Gene Kelly Sang In – Not Water From a Burst Drain Pipe

Earlier this year, an Iowa court recognized that rain becomes rainwater once it has fallen, and it held that policy language excluding loss caused by “rain” – without more – will not operate to bar coverage for water from a burst drain pipe that ruptured during a rainstorm.  The decision is reported at Amish Connection, Inc. v. State Farm Fire & Cas. Co., 847 N.W.2d 237, 2014 WL 1234161 (Iowa Ct. App., March 26, 2014). The insured, Amish Connection, Inc., leased space in a mall in Waterloo, Iowa, and its merchandise was damaged after a 4” cast iron drain pipe above the ceiling burst during a rainstorm.  The pipe carried water from the roof drains to a storm sewer.  The

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Posted in Flood, Water

Argument That Rain Alone Can’t Cause a Flood “Would be News to Noah” Says a California Court

Last month an appellate court in California looked to the Bible, citing the Book of Genesis when rejecting the argument that an inundation caused solely by heavy rain was not an excluded flood.  The opinion was handed down in Horvath v. State Farm General Ins. Co., 2014 WL 2931049 (Cal.App., June 30, 2014). The insureds, Peter and Susan Horvath, owned a home at the end of a cul-de-sac at the bottom of Bell Canyon Drive.  On December 22, 2010, severe rainstorms led to what the husband described as a “river of water coming down the street.”  The town’s drainage systems were overwhelmed, and the cul-de-sac quickly filled up, ultimately inundating the first floor of the insureds’ home with 18” of

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Posted in Ambiguity, Flood, Water

New York Court: Storm Surge is a Species of Excluded Flood

One of the most litigated issues in the Gulf States in the wake of Hurricane Katrina was whether flood exclusions bar coverage for loss by storm surge.  The courts ultimately decided that the answer was yes.  The Superstorm Sandy jurisdictions have yet to address that question, but a recent federal case in New York suggests that the matter will ultimately be resolved in the same fashion in the Empire State.  The decision is New Sea Crest Healthcare Center, LLC, et al. v. Lexington Ins. Co., — F.Supp.2d —, 2014 WL 2879839 (E.D.N.Y., June 24, 2014). At present, the issue will not crop up nearly as frequently as it did in the wake of the 2005 storm because Katrina taught a

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Posted in Ambiguity, Flood, Superstorm Sandy

New York Court: All Sandy Losses, Including “Downstream” Financial Ones, Capped By Annual Aggregate Limit For Flood

Superstorm Sandy jurisprudence is starting to shed light on some unresolved issues in the effected states.  In El-Ad 250 West LLC v. Zurich American Ins. Co., — N.Y.S.2d —, 2014 WL 2931058 (N.Y.Cty., June 27, 2014), a New York court held last week that a $5 million annual aggregate limit of liability for losses caused by flood capped any recovery for all such loss, without regard to whether it was physical damage to property or a “downstream” financial loss such as delay in completion.  It was a case of first impression in New York. On October 29, 2012, the policyholder, El-Ad 250 West LLC, was converting an 11-story office building into a 12-story luxury condominium complex in lower Manhattan.  Superstorm

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Posted in Builders' Risk, Delay in Completion, Flood, Superstorm Sandy

New York Holds Water Which Backs Up Is Covered If It Originated On The Insured Premises

Last week, in Pichel v. Dryden Mutual Ins. Co., — N.Y.S. 2d —, 2014 WL 1923736 (May 15, 2014), an intermediate level appellate panel in New York brought the state into line with the interpretation of water backup adopted by a number of other jurisdictions.  The decision held that policy references to a “plumbing system” mean the plumbing system on the insured premises itself.  As a result, a loss caused by water which backs up through sewers and drains is covered if the overflow originated within the insured’s property but excluded if the backup originated off site, as from a clogged municipal sewer system for example. The policyholder owned an apartment complex that was insured by Dryden Mutual.  The structure

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Posted in Flood, Seepage or Leakage, Water
About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
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