New York Court Finds Delay In Completion Losses Are Subject To Flood Annual Aggregate Limit

In El-Ad 250 West LLC v. Zurich American Ins. Co., 2014 N.Y. Misc. LEXIS 2838 (June 27, 2014), a New York court analyzed the application of various provisions contained in a Builders Risk Insurance Policy (the “Policy”) issued to El-Ad 250 West LLC (“El-Ad”) by Zurich with respect to losses sustained to the building located at 250 West Street in Manhattan (the “Property”) due to Superstorm Sandy. On October 29, 2012, while the Policy was in effect, Superstorm Sandy caused damage to the Property, resulting in delay-in-completion losses. On July 2, 2013, El-Ad filed a partial proof of loss for $5 million. Zurich rejected El-Ad’s claims and did not pay any of El-Ad’s losses.

The parties filed cross motions for partial summary judgment regarding whether delay in completion losses arising from a flood are subject to the Policy’s flood limits and flood deductible. The Policy provides sublimits of $108 million for “Physical Damage Coverage,” $7 million for “Delay in Completion Coverage,” and $5 million for losses caused by a flood. Flood losses are also subject to a deductible of the greater of either $250,000 or 5% of the loss. El-Ad argued that the flood loss aggregate limit and deductible only apply to physical damage to the property caused by a flood, while Zurich argued that the Policy’s definition of flood loss does not refer to physical damage, but rather “all losses or damages arising” from a flood, such that delay in completion losses arising from a flood are subject to the flood limitations of the Policy.

The New York court analyzed the Policy language. Declaration 7.C.(2) stated that, “the maximum amount [Zurich] will pay for loss or damage in any one OCCURRENCE, and/or in the aggregate annually for OCCURRENCES, shall not exceed $5 million by the peril of FLOOD.” Section III.7 stated that, “as respects the peril of FLOOD, OCCURRENCE shall mean all losses or damages arising during a continuous condition as defined in the definition of FLOOD.” The court found that the scope of the Policy’s annual aggregate flood limits is clear based upon that language. A loss that would not have occurred but for a flood is subject to a $5 million annual aggregate limit, without regard to the type of loss suffered, since “all losses or damages arising during a flood” clearly does not exclude non-physical losses.

Thus, the court found in favor of Zurich and granted its cross-motion for summary judgment, limiting the amount Zurich must pay for all “loss or damage” caused by flood, including both physical damage and economic delay in completion losses, to $5 million. The court also found that the flood deductible applied to any such payments by Zurich.

- See more at: http://www.traublieberman.com/first-party-coverage/2014/0702/4754/#sthash.dCbL1B9F.dpuf

In El-Ad 250 West LLC v. Zurich American Ins. Co., 2014 N.Y. Misc. LEXIS 2838 (June 27, 2014), a New York court analyzed the application of various provisions contained in a Builders Risk Insurance Policy (the “Policy”) issued to El-Ad 250 West LLC (“El-Ad”) by Zurich with respect to losses sustained to the building located at 250 West Street in Manhattan (the “Property”) due to Superstorm Sandy. On October 29, 2012, while the Policy was in effect, Superstorm Sandy caused damage to the Property, resulting in delay-in-completion losses. On July 2, 2013, El-Ad filed a partial proof of loss for $5 million. Zurich rejected El-Ad’s claims and did not pay any of El-Ad’s losses.

The parties filed cross motions for partial summary judgment regarding whether delay in completion losses arising from a flood are subject to the Policy’s flood limits and flood deductible. The Policy provides sublimits of $108 million for “Physical Damage Coverage,” $7 million for “Delay in Completion Coverage,” and $5 million for losses caused by a flood. Flood losses are also subject to a deductible of the greater of either $250,000 or 5% of the loss. El-Ad argued that the flood loss aggregate limit and deductible only apply to physical damage to the property caused by a flood, while Zurich argued that the Policy’s definition of flood loss does not refer to physical damage, but rather “all losses or damages arising” from a flood, such that delay in completion losses arising from a flood are subject to the flood limitations of the Policy.

The New York court analyzed the Policy language. Declaration 7.C.(2) stated that, “the maximum amount [Zurich] will pay for loss or damage in any one OCCURRENCE, and/or in the aggregate annually for OCCURRENCES, shall not exceed $5 million by the peril of FLOOD.” Section III.7 stated that, “as respects the peril of FLOOD, OCCURRENCE shall mean all losses or damages arising during a continuous condition as defined in the definition of FLOOD.” The court found that the scope of the Policy’s annual aggregate flood limits is clear based upon that language. A loss that would not have occurred but for a flood is subject to a $5 million annual aggregate limit, without regard to the type of loss suffered, since “all losses or damages arising during a flood” clearly does not exclude non-physical losses.

Thus, the court found in favor of Zurich and granted its cross-motion for summary judgment, limiting the amount Zurich must pay for all “loss or damage” caused by flood, including both physical damage and economic delay in completion losses, to $5 million. The court also found that the flood deductible applied to any such payments by Zurich.

 

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