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Sunday, January 19, 2020

New Jersey court rules $100 million flood sublimit does not apply for Superstorm Sandy damages

State Court

By William Sassani | Dec 5, 2019


TRENTON, N.J. (Legal Newsline) – The Appellate Division of the Superior Court of New Jersey has affirmed a lower court’s decision of summary judgment in favor of New Jersey Transit and against several insurance companies regarding compensation for damages related to Superstorm Sandy.

In the court’s 32-page decision, which was issued Nov. 18, Judge Joseph Yannotti said that the insurance companies had argued on appeal that the damages caused to New Jersey Transit by the storm were “losses caused by flood.” Thus, those damages were “subject to the $100 million flood sublimit in the policies.” 

New Jersey Transit, on the other hand, alleged that it was entitled to coverage up to the full $400 million policy limits for the damages.

"In addressing this legal issue, we are guided by the general principle that insurance policies must be analyzed under the rules of contract law,” Yannotti wrote. 

To do this, Yannotti wrote the court would have to “determine the meaning of a provision in an insurance policy,” by taking into account the “plain meaning of the language at issue.” This involved parsing out the meaning of the words “flood” with other words such as “storm surge” or “named windstorm.”

In his analysis, Yannotti disagreed with the insurance companies.

"The plain language of the policies indicates that the purpose of the 'named windstorm' definition was to differentiate between the inundation caused by a 'surge' of water, which may have no relationship to a storm, and the inundation resulting from a "storm surge," which the policies define as 'wind driven water associated with a ‘named windstorm,'" he wrote. 

“Accordingly, we are convinced the plain language of the policies provides that water damage resulting from a 'storm surge' associated with a 'named windstorm' does not fall within the definition of a 'flood.'"

Yannotti decided that the $100 million sublimit did not apply.

The defendants in the suit include RSUI Indemnity Co., Westport Insurance Corp. and Maiden Specialty Insurance Co.

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