Interrupted by Sandy

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In Johnson Gallagher Magliery, LLC v. The Charter Oak Fire Insurance Company, 2014 WL 1041831 (S.D.N.Y. Mar. 18, 2014), the United States District Court for the Southern District of New York, granting a motion for partial summary judgment, held that a law firm was not entitled to certain lost business income caused by Superstorm Sandy.

The law firm leased office space at 99 Wall Street in New York City.  The building was supplied electricity from the Consolidated Edison of New York Bowling Green Network.  On the evening of October 28, 2012, due to the looming storm, the office space at 99 Wall Street was evacuated.  The next night, on October 29, 2012, ConEd preemptively shut down the Bowling Green Network to prevent major customer and network damage.  When Superstorm Sandy hit, flooding damaged the Bowling Green Network equipment.  The Bowling Green Network was re-energized on November 3, 2012, but 99 Wall Street did not actually receive electricity until November 11, 2012.

The law firm filed a claim with its business casualty insurer, The Charter Oak Fire Insurance Company, for, amongst other things, lost business income.  Charter Oak denied the claim, citing the water exclusion in its policy.  In the ensuing insurance coverage litigation, Charter Oak filed a motion for partial summary judgment which asserted that the policy’s water exclusion barred coverage for the law firm’s lost business income when that loss was due to the interruption of electrical service by way of the Bowling Green Network, which had suffered water damage.

The Southern District of New York ruled that Charter Oak was not obligated to pay for business losses that the law firm sustained during the time period when the Bowling Green Network was shut down, from October 29, 2012 through November 3, 2012.  The court held, in part, that the water exclusion applied to business losses stemming from the shutdown of the Bowling Green Network, which suffered water damage that prevented the re-energizing of the network until November 3, 2012.  In so ruling, the court relied on deposition testimony from a ConEd senior engineer who confirmed that there was extensive water damage to the Bowling Green Network.

 

Topics:  Business Interruption, Hurricane Sandy, Natural Disasters, Severe Weather

Published In: Civil Remedies Updates, General Business Updates, Insurance Updates, Commercial Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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