depression, none of which accurately describe
Superstorm Sandy.
Some insurance companies nonetheless have set
out to apply so-called “hurricane” or “named
storm” deductibles to covered Sandy losses despite
the National Weather Service’s classification of
Sandy as a post-tropical cyclone and admonishments by the governors of affected states not to
do so. In AFP 104 Corp. v. Columbia Casualty
Company, United States District Court for the
District of New Jersey (Civ. Action No. 13-4077),
plaintiff policyholder, a resort and spa located in
Long Branch, New Jersey, suffered about $800,000
worth of damage as a result of Sandy. The property
insurance policy at issue contained a minimum $1
million named storm deductible. Named storm was
defined in the policy as follows:
A storm that has been declared to be a
named tropical storm or hurricane by the
U.S. National Weather Service or other
government authority including hurricane
or tropical storm spawned tornado(s) or
microburst(s). The named tropical storm or
hurricane … ends when the National Weather Service officially declares the named
tropical storm or hurricane permanently
downgraded to a tropical depression.
The court denied the insurance company’s motion
to dismiss, holding that, if later proven to be true,
plaintiff ’s allegation that “[u]pon landfall in New
Jersey, Sandy was characterized as a post-tropical
storm,” easily establishes that the named storm
deductible is not applicable to plaintiff ’s claim.
Civil Authority Coverage
Many businesses that did not suffer property
damage at their insured locations resulting from
Superstorm Sandy did nonetheless suffer a loss of
business income resulting from the storm. While
“standard” business interruption coverage would
not apply under such circumstances, other time
element overages, such as “civil authority” coverage, may apply. Civil authority coverage typically
is triggered where access to the insured premises
is prohibited, prevented or impaired by the action/
order of a civil authority, such as a city’s mayor.
While direct physical loss or damage caused by a
“
Many businesses
that did not suffer
property damage at
their insured locations
resulting from
Superstorm Sandy
did nonetheless suffer
a loss of business
income resulting
from the storm.
”
covered cause of loss still is required in order to
trigger civil authority coverage, that loss or damage can occur away from the insured premises, and
the damaged property need not be owned by the
insured. However, policyholders who do not have
flood coverage may not be able to take advantage of
an order of civil authority if the order to vacate was
related solely to flooding, and not also to concerns
about wind damage. Non-specific orders can lead
to coverage disputes.
Executive orders in New York City have given
rise to some disputes regarding the period of time
during which insurance companies will cover civil
authority losses. Some insurance compan ies have
argued that coverage is terminated at the time of
former Mayor Bloomberg’s Executive Order 165,
which permitted reoccupation of premises in lower
Manhattan only after the Buildings Department
certified it was safe to do so. In many cases, however, policyholders were not permitted to reoccupy
their premises for weeks and even months after Executive Order 165 was issued. The theoretical time
in which such policyholders could have reoccupied
their premises had the Buildings Department allowed it should have little bearing on the insurance
companies’ obligations to pay civil authority claims
for the entire period of time such policyholders
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