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The windstorm exclusion in an equipment breakdown policy issued by a CNA Financial Corp. unit is ambiguous and a Brooklyn shopping center may have coverage for damage sustained during Superstorm Sandy, a federal appeals court ruled Tuesday.
The case stems from damage to the building’s electrical equipment, located in the basement, sustained when water infiltrated through a tear in the roof caused by the October 2012 storm. Superstorm Sandy caused significant damage in New York, New Jersey and other areas in the eastern United States.
In 7001 East 71st Street L.L.C. v. Continental Casualty Co., a federal court ruled last year that the policy, which offered $5 million in limits, excluded damage to equipment caused by a windstorm.
The 2nd U.S. Circuit Court of Appeals disagreed, noting that the various exclusions in the policy had different wordings.
Read in the context of the whole policy, the windstorm exclusion states, “We will not pay for loss or damage caused directly or indirectly by a breakdown … that is caused by windstorm,” the ruling says.
This contrasts with the policy's earth movement exclusion, which states “we will not pay for loss or damage caused directly or indirectly by earth movement,” the ruling states, and the explosion exclusion, which states “we will not pay for loss or damage caused directly or indirectly by an explosion.”
The windstorm exclusion can be read as an “inartful” way of saying that CNA unit Continental won’t pay for losses caused directly or indirectly by a storm, but it could also be read as applying “only when a windstorm directly caused damage to covered equipment,” the ruling says.
The appeals court remanded the case for further proceedings.
The policyholder had a separate dispute with Chubb Ltd., its property insurer.
A Zurich Insurance Group Ltd. unit is not obligated to provide coverage in connection with a crane damaged during 2012’s Superstorm Sandy under a policy exclusion, says New York’s highest court in affirming a lower court ruling.