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Travelers unit not liable for debris removal above flood damage cap

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A Travelers Cos. Inc. unit is not responsible for debris removal costs for a property damaged during Superstorm Sandy in excess of its policy’s $1 million flood damage cap, according to a Supreme Court of New Jersey decision issued Thursday. 

Plaintiffs Oxford Realty Group Cedar, CLA Management and R.K. Patten L.L.C. own and manage an apartment complex on Patten Avenue in Long Branch, New Jersey, located in Flood Zone A per National Flood Insurance Program classifications, according to court documents. Travelers Excess and Surplus Lines Co. insured the property under a policy effective Feb. 1, 2012, to Feb. 1, 2013. The original insurance policy excluded all flood coverage, but the parties added a flood endorsement that limited flood coverage to $1 million. 

The property suffered significant flood damage when Superstorm Sandy struck New Jersey in October 2012, requiring repair efforts, including "the removal of damaged or undamaged portions of the building complex and the removal of the debris which resulted from the construction and from the damage caused by the flood,” the documents stated. The companies submitted a claim to Travelers for flood damage above $1 million, with an additional $208,000 in debris removal costs, but Travelers asserted that all damage caused by the flood was subject to the $1 million limit for a flood occurrence. 

In July 2013, Oxford sued Travelers to demand payment for debris removal costs up to $500,000 in addition to the $1 million paid for flood damage. In April 2014, a Superior Court trial judge granted partial summary judgment in favor of Travelers after not finding the policy to be ambiguous regarding flood and debris removal coverage and then granted summary judgment on the remaining counts to Travelers in August 2014. 

While the Appellate Division agreed with the trial court that the flood and debris removal coverage were unambiguous, it nevertheless concluded that the policy required the provision of up to $500,000 for debris removal coverage in addition to the $1 million flood limit. The court decided that the limitation applied only to insured buildings rather than insured occurrences and that the flood endorsement did not limit the damages to $1 million because the endorsement applied "only to loss or damage to covered property caused by flood, meaning Oxford's building."

But the New Jersey Supreme Court agreed with the trial court that the insurance policy unambiguously capped the insured's recovery at $1 million and reversed the appellate court’s decision to grant additional debris removal coverage.

“Oxford's alternative reading presents a conflicting interpretation suggested by litigants rather than a genuine ambiguity,” the court stated. “The policy limits Oxford's flood coverage to $1 million and therefore will be enforced as written.”