Flood exclusion shields Lloyd’s underwriters from marina claim

Lloyd’s of London underwriters are not obligated to indemnify a marina operator, five of whose docks were damaged in a storm, because of a flood exclusion in its policy, says a federal appeals court, in affirming a lower court ruling.

On the night April 30, 2011, a storm generated strong winds and left 7 inches of rain in the Little Maumelle River basin, according to Friday’s ruling by the 8th U.S. Circuit Court of Appeals in New Orleans in Hudson Enterprises Inc., doing business as River Valley Marina v. Certain Underwriters at Lloyd’s London Insurance Cos. et al.

The River Valley Marina, owned by Little Rock, Arkansas-based Hudson Enterprises, which was on the river’s north bank, lost five of its eight docks to the storm, with the surviving three docks located upstream from those that were swept away, according to the ruling.

The marina’s insurance policy covered “direct physical loss or damage to” its docks. It included an exclusion, however, for losses arising from “flood, surface water, waves, tides, tidal waves, of any body of water or their spray, all whether driven by wind or not,” according to the ruling.

Lloyd’s denied coverage, and Hudson Enterprises filed suit.  The U.S. District Court in Little Rock granted Lloyd’s summary judgment after concluding the docks were lost to flood, and the marina appealed.

A three-judge appeals court panel upheld the lower court ruling. Among Hudson’s arguments was that strong winds were the sole cause of its damages because they caused a utility pole to crash into its docks.

Lloyd’s civil engineering expert concluded, however, that “the utility pole had not fallen down as a result of wind because it would have taken wind gusts of more than 200 miles per hour to knock down a utility pole of that size,” said the ruling.

“The expert also concluded that even if the wind had caused the pole to fall, the impact could not have caused the structural damage to the docks,” said the ruling, in affirming the lower court decision.