Getting Schooled by Sandy and Irene

In a recent article published in the Connecticut Law Tribune, two attorneys emphasized how important it is for policyholders to thoroughly read their insurance policies in the wake of numerous coverage disputes as a result of damages caused by Hurricanes Sandy and Irene. Regen O’Malley and Steven Zakrzewski stress that in all of these cases, the analysis almost always begins and ends with the express language of the insurance policy at issue. A case involving Hurricane Sandy recently decided by the U.S. District Court in Connecticut proves how crucial it is for a policyholder to read the entire policy and review coverage with an agent or broker.

In Great Lakes International Trading v. Travelers Property Casualty Co. of America, the plaintiff filed suit against its insurer over a disputed claim for more than $1.5 million in damages to the insured’s inventory of seeds, dried fruit, and edible nuts caused by Hurricane Sandy. The plaintiff, a food importer, had various insurance policies with Travelers, one of which contained a warehouse coverage endorsement providing for up to $5 million in coverage for damages to goods stored in the plaintiff’s warehouse. However, the policy explicitly stated that “the peril of flood is excluded” from coverage. Plaintiff sued after Travelers denied additional coverage for damages it claimed was attributable to rising flood waters from a nearby river. In granting Travelers’ motion for summary judgment, the Court held that the policy language was clear and unambiguous. The exclusion at issue stated, “It is further understood and agreed that the peril of flood is excluded for the following location,” then listed the name and address of the plaintiff’s New Jersey warehouse. Plaintiff tried to argue that the flood exclusion did not apply because it was tacked on at the very end of the warehouse coverage endorsement. Although the Court admitted that the placement of the exclusion was awkward, it enforced the exclusion because of the sufficiently clear language.