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Court affirms Alliant’s negligence over flood sublimit

Posted On: Dec. 19, 2017 1:55 PM CST

A federal appeals court has refused to overturn two jury verdicts that found Alliant Insurance Services Inc. negligent for reducing the flood sublimit on a New York property owner’s policy before Hurricane Sandy, and finding it was liable for $20 million.

In spring 2011, Newport Beach, California-based Alliant, acting as an insurance broker for New York-based Cammeby’s Management Company L.L.C., negotiated a policy with Johnston, Rhode Island-based Affiliated FM Insurance Company, according to Tuesday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in Cammeby’s Management Co., L.L.C., et al. v. Alliant Insurance Services, Inc.

The policy initially had a $10 million sublimit and went into effect on June 30, 2011. The following day, Cammeby’s insurance consultant emailed Alliant to inquire about increasing the flood sublimit to $30 million.

Alliant solicited a quote from Affiliated FM, Cammeby’s accepted it and the insurer issued a new policy reflecting the $30 million sublimit, according to the ruling.

But some managers of the property balked about the higher premium, and the consultant emailed Alliant about decreasing the flood sublimit back to $10 million.

Alliant responded to the consultant that the flood sublimit could be reduced, but this was never put into writing, according to the ruling.  Cammeby’s argues there was no agreement, while Alliant contends Cammeby’s vice president verbally accepted the offer to reduce the sublimit. Alliant contended also the company ratified the agreement when it received a premium reduction and a pro rata refund of $121,815 for premiums already paid.

Hurricane Sandy in 2012 resulted in more than $30 million in damages to Cammeby’s. The company filed suit against Affiliated FM, which has since been dropped as a defendant in the litigation, and Alliant in U.S. District Court in New York.

A jury determined the insurance policy Cammeby’s purchased limited the amount of flood damage to $10 million, which is not being appealed. The jury also found Alliant negligently reduced the flood sublimit from $30 million to $10 million, leaving Alliant liable for the difference.

Alliant moved for a new trial, and a jury determined Cammeby’s did not ratify the flood sublimit reduction. The District Court denied Aliant’s Alliant’s motion for judgment as a matter of law, and Alliant appealed.

A three-judge appeals court panel unanimously ruled in Cammeby’s favor. Alliant argues the evidence proves Cammeby’s knew about and approved the reduction in the flood policy limit, said the ruling.

“We disagree. Viewing all evidence, in the light most favorable to Cammeby’s, we conclude that a reasonable juror could find that Cammeby’s lacked either the knowledge or intent necessary to ratify the policy limit reduction,” said the ruling, in affirming the lower court’s judgment.