New Jersey's Supreme Court heard arguments on Monday in an appeal against a decision that New Jersey Transit Corp.'s ("NJ Transit") insurance companies are required to insure $ 400 million in water damage caused by Hurricane Sandy.
The case stems from an insurance claim made by NJ Transit after the storm shook the east coast in 2012. NJ Transit claimed over $ 400 million in losses due to damage to its tracks, bridges, tunnels and power plants. In response, its tower of real estate insurers took the position that a $ 100 million flood limit was applied to limit NJ Transit's recovery under its insurance tower, not the $ 400 million police limit. The trial court granted a summary judgment to NJ Transit and held that NJ Transit was entitled to full coverage of $ 400 million under the tower's named windstorm coverage. The insurers appealed and again claimed that the flood limit was applied to the claim.
The New Jersey Appellate Division upheld the Court's decision that the named windstorm coverage was applied. In this way, the Board of Appeal focused on the clear language of politics. Specifically, the Court of Appeal distinguished the definitions of the defined terms "named storm" and "flood". The Court noted that the definition of "named storm", which included the words "storm surge", was more specific than the definition of "flood", which used only the word "flood". Consequently, the Court held that the named storm surge limits were applied, not the flood sublimity.
In addition, the Court applied the effective immediate doctrine to establish that wind storm coverage was for loss. The court found that the storm surge caused by Hurricane Sandy was a danger that was particularly insured against and since the hurricane's storm surge resulted in "an uninterrupted sequence" of events, the storm surge is considered the closest cause of the entire loss. Consequently, the Board of Appeal concluded that if NJ Transit's losses were caused both by "flood" and by a storm surge in connection with a "named windstorm", and the effective immediate cause of the doctrine is applied, NJ's Transit coverage would not be limited to the flood.
On Monday, the Supreme Court of New Jersey dealt with arguments about insurers' appeal of the Appellate Division's decision. The judges of the Supreme Court referred to the clear language of the policy when examining the insurers' arguments. Several court members questioned the meaning of the provisions and expressed concern that insurers' arguments could make the abundance of windstorms redundant.
The Supreme Court's decision will help to clarify issues that have been discussed for a long time, especially where to draw between flood and storm surge coverage in connection with a named storm. As always, a careful analysis of a property policy's coverage, especially where there is overlapping or floating coverage offered under the policy, is the key to getting a fair recovery.