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New Jersey Court Rejects Theory of Spoliation By Encouragement

Three years out, Superstorm Sandy litigation continues to wend its way through New Jersey’s courts.  Last weekend, a federal judge in the state handed a victory to the insurer in Stiso v. State Farm Fire & Cas. Co., 2015 U.S. Dist. LEXIS 155762, 2015 WL 7296081 (D.N.J., Nov. 18, 2015).  In doing so, the court reaffirmed the enforceability of what it called anti-concurrent causation (ACC) “lead-in” language.  It also rejected the doctrine of “spoliation based on encouragement” – the policyholders had argued that they could not meet the burden of showing that all of their loss was caused by a covered peril because the carrier had “actively encouraged” them to begin repair early on and thereby “persuaded” them to destroy

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Posted in Anti-Concurrent Causation, Flood, Sewer Backup, Spoliation, Superstorm Sandy, Water

New Jersey Panel: If a Flood Is Excluded, So Are the Unhealthy Water-Borne Substances that It Leaves Behind

Yesterday, a unanimous panel of New Jersey’s intermediate level appellate court rejected policyholder arguments that even though flood was excluded, the proximate cause of their Superstorm Sandy loss was the non-excluded peril of damage from “unhealthy water-borne substances” left behind by the receding water.  In Riccio v. Allstate N.J. Ins. Co., 2015 WL 6181466, 2015 N.J. Super. LEXIS 2417 (N.J. App., Oct. 22, 2015), the judges recognized that to hold otherwise would render the flood exclusions in homeowner’s policies meaningless. The insureds owned a home in Little Silver that was inundated by 20”-36” of water when a creek behind their property overflowed its banks during Superstorm Sandy on October 29, 2012.  They initially attempted to clean the house themselves, removing

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Posted in Contamination, Flood, Homeowners Coverage, Microorganisma, Superstorm Sandy, Water

New Jersey Judge Writes a Primer on How Not to Draft a Denial Letter

Last month, a federal trial court in New Jersey shot down an insurer’s arguments that it had unambiguously denied coverage for Superstorm Sandy damage in a letter to the insured.  In Liguori v. Certain Underwriters at Lloyds, 2015WL 4402851. 2015 U.S. Dist. LEXIS 93090 (D.N.J., Jul. 17, 2015),  the judge found that correspondence announcing that the carrier was “pleased to inform you” that wind damage was covered while flood was “expressly excluded” and concluding with what he called an “open-ended statement that the letter could be amended should new information become available” simply did not pass muster as a formal denial. The insureds owned a home in Seaside Heights that was demolished by the storm on October 29, 2012, and

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Posted in Homeowners Coverage, Hurricane, Loss Adjustment, Suit Limitation, Superstorm Sandy

Insurance Fraud Act Suits by Insurers Held to Trigger Right to Jury Trials in New Jersey

Last week, the New Jersey Supreme Court unanimously held that a civil defendant sued by an insurance company for violations of the state’s Insurance Fraud Prevention Act (IFPA) has the right to trial by jury.  In Allstate New Jersey Ins. Co. v. Lajara, 2015 WL  4276162, 2015 N.J. LEXIS 797 (Jul. 16, 2015), the six justices decided that a statutory IFPA claim triggers the jury trial right because it seeks compensatory and punitive damages and is legal in nature as a result and because the elements necessary to prove such a claim are similar to common-law fraud. In December, 2008 Allstate and four affiliated companies brought suit against 63 defendants, alleging the violations of IFPA.  Those sued included physicians, chiropractors,

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Posted in Fraud and False Swearing, Regulation, U.S. Legal System

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

Anti-Sequential Causation Clause Upheld in Hurricane Irene Case in New Jersey

In Ashrit Realty, LLC v. Tower National Ins. Co., 2015 WL 248490, 2015 N.J. Super. Unpub. LEXIS 107 (N.J.Super.Ct., App.Div., Jan. 20,  2015), New Jersey’s Appellate Division held that an anti-concurrent/anti-sequential causation clause precluded coverage for a Hurricane Irene loss.  A covered peril (hidden decay) led to an excluded peril (soil erosion), bringing down part of the insured’s structure.  As the court explained, such a provision “excludes coverage in situations where a covered event and an excluded event contribute, concurrently or sequentially, to a single loss.”  While the New Jersey Supreme Court has yet to weigh in on anti-concurrent/anti-sequential causation clauses, the case adds to growing body of lower court decisions holding or suggesting that such provisions are valid and

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Posted in Anti-Concurrent Causation, Causation, Collapse, Hurricane, Hurricane Irene, Seepage or Leakage

New Jersey Court: Loss of Use – Without More – Can Be “Direct Physical Loss or Damage”

Last month, a New Jersey federal court held that the term “direct physical loss of or damage to” property did not require that the property be physically altered in any permanent way.  In Gregory Packaging, Inc. v. Travelers Property Cas. Co., 2014 WL 6675934, 2014 U.S. Dist. LEXIS 165232 (D.N.J., Nov. 25, 2014), the court determined that an ammonia release that rendered the insured manufacturing plant unusable until the gas had been dissipated “physically transformed the air” within the facility and thereby inflicted direct physical loss or damage to the plant. Gregory Packaging manufactured and sold juice cups, and it was in the process of installing a refrigeration system at a new plant in Newman, Georgia when anhydrous ammonia was

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Posted in Direct Physical Loss or Damage, Explosion, Seepage or Leakage

New Jersey Court Holds $22 Million “Named Storm” Deductible Applicable to a Superstorm Sandy Loss

On October 29th, a New Jersey trial court held that a commercial policyholder’s Superstorm Sandy claims were subject to a $22 million “named storm” deductible equal to 2% of the total insurable values at risk at all of the loss locations for which the insured made claim.  In Wakefern Food Corp., et al. v. Lexington Ins. Co., Case No. L-6483-13 (N.J.Super.Ct., Middlesex Cty., Oct. 29, 2014), the court held that damage had begun to occur hours before Sandy was downgraded and no longer constituted a “named storm” as defined and that that fact “created a substantial nexus between the storm and Wakefern’s total losses” justifying application of the deductible. Plaintiff Wakefern was a buying cooperative consisting of the owners of

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Posted in Deductible, Hurricane, Superstorm Sandy

Federal Courts In New York and New Jersey Explore Streamlining Superstorm Sandy Discovery

Despite opposition by both many attorneys and the Federal Emergency Management Agency (“FEMA”), the federal court for the Eastern District of New York has now taken the first steps towards grouping some of the hundreds of pending Superstorm Sandy cases and expediting discovery in all of the them, and the District of New Jersey appears very likely to follow suit. Superstorm Sandy is now officially the second most costly storm in United States history, having caused over $50 billion in damages, and one of the most heavily-impacted jurisdictions was the United States District Court for the Eastern District of New York.  The Eastern District comprises Staten Island and all of Long Island, including the New York City boroughs of Brooklyn

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Posted in Catastrophes, Superstorm Sandy, U.S. Legal System
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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