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New Jersey Transit Corp. has filed suit against Lloyd's of London and six other excess insurers, stating they incorrectly applied a flood sublimit to its comprehensive insurance coverage for Superstorm Sandy and owe it another $300 million in coverage.
The insurers have contended the damage created by Sandy, the Oct. 29, 2012, storm that the authority says caused significant damage to its facilities and equipment, fell under the $100 million flood sublimit in its coverage, according to the litigation in New Jersey Transit Corp. v. Certain Underwriters at Lloyd's et al., which was filed in state court in Newark, New Jersey.
Instead, says the Newark-based authority's lawsuit, Sandy was a “named windstorm” that has no sublimit under its policies, which provide a total of $400 million in insurance coverage, entitling it to another $300 million.
The authority has already been paid the $100 million, according to the complaint.
The complaint states the policies provided by the insurers are in four layers above a per-occurrence deductible of $500,000. The first and second layers of coverage are $50 million each, the third layer is $175 million and the fourth is $125 million.
With the exception of the first layer insured by Lexington Insurance Co., a unit of American International Group Inc. that is not a defendant in the case, multiple insurance companies, including the defendants, are responsible for the coverage available in each layer, with each company assuming a certain percentage of each layer's coverage limit.
The policies mainly comprise identical forms of coverages, terms and conditions, with almost all having the same definitions, according to the Oct. 1 lawsuit. The broker on the coverages is Marsh L.L.C., which is not a defendant.
The litigation seeks a declaratory judgment that the flood sublimit does not apply, damages, pre- and post-judgment interest and attorney fees, among other compensation.
In addition to Lloyd's, the other defendants are Hudson Specialty Insurance Co., Ironshore Specialty Insurance Co., Maiden Specialty Insurance Co., RSUI Indemnity Co., Torus Specialty Insurance Co. and Westport Insurance Corp.
The insurers either could not be reached or had no comment.
According to the complaint, across the state, New Jersey Transit stations, tracks, bridges tunnels, power stations and “all manner of equipment” were damaged by wind and water during Sandy, including a record 13-foot storm surge.
It states even train lines that were not directly damaged were crippled by power outages that it made it impossible for New Jersey Transit to operate signals and switches. Many projects are still ongoing, and extensive repairs remain to be made on certain facilities, it states.
According to the New York-based Insurance Information Institute Inc., 93% of the 1.5 million claims filed by businesses and homeowners were settled by April 2013, six months after the tropical storm occurred.
Very few small and midsize businesses affected by Superstorm Sandy have been able to recover some portion of their financial losses through insurance, according to a new report by the Federal Reserve Bank of New York.