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The New Jersey Transit Corp. is entitled to its full $400 million of insurance coverage in connection with damage caused by Superstorm Sandy, rather than just a $100 million flood sublimit, a New Jersey appeals court ruled, upholding a lower court decision in litigation filed against Lloyd’s of London and several other excess insurers.
A three-judge panel of the New Jersey appellate division in Newark held that because Sandy was a “named windstorm,” the $100 million flood sublimit in its coverage did not apply, according to Monday’s ruling in New Jersey Transit Corp. v. Certain Underwriters at Lloyd’s London et al.
The litigation was filed in October 2014, and the lower court issued its ruling in NJT’s favor in September 2017.
The transit authority’s coverage included a primary layer of $50 million, which was insured by American International Group Inc. unit Lexington Insurance Co., which is not party to the litigation, according to the ruling.
The second layer provided coverage of up to $100 million; the third layer provided an additional $175 million; and the fourth provided coverage of $125 million, for a total of $400 million.
The coverage provided for a $100 million flood sublimit, but also provided coverage for a named windstorm without a sublimit.
The insurers had argued the sublimit applied. The appeals court agreed with the lower court that it did not, and that the NJT was entitled to the full $400 million in coverage.
The flood sublimit applies to “losses caused by flood,” said the ruling. “Named windstorm” is separately defined to include “wind driven water, storm surge and flood” associated with a “named windstorm.”
“The policies do not define ‘flood’ to include ‘storm surge’ and ‘wind driven water’ associated with such a ‘named windstorm,’” said the ruling.
“Where, as here, two provisions of an insurance policy address the same subject, ‘the more specific provision controls over the more general,’” said the ruling, in citing an earlier decision.
“Furthermore, if the parties had intended that damage from a ‘storm surge’ would be subject to the flood sublimit, the policies would have stated so in plain language,” said the ruling, in affirming the lower court.
In addition to Lloyd’s, 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 Co.
Attorneys in the case had no comment or did not respond to a request for comment.
In May, a federal appeals court affirmed a $750,000 judgment in favor of an AIG unit in connection with a dinner cruise ship that sank at a marina after being hit by Superstorm Sandy.
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.