Certain losses absorbed by a luxury condominium project due to Hurricane Sandy are subject to an insurance policy’s flood limits and deductible, Manhattan Supreme Court Justice Shirley Kornreich (See Profile) has held.
The judge’s June 27 decision in El-Ad 250 West v. Zurich American Insurance, 652964/2013, turned on the question of whether non-physical damage suffered by El-Ad, a limited liability company, in the wake of the storm was still subject to a $5 million annual aggregate limit for losses caused by flood.
El-Ad argued the limit only applied to actual physical damage and that the financial losses caused by delay in project completion were “downstream” losses that should be exempt from the cap.
El-Ad alleges it suffered about $20 million in damages. It sued Zurich, seeking in part a judicial declaration that its builders’ risk insurance policy provides up to $7 million in completion delay loss coverage.
But Zurich argued that the $7 million maximum recoverable amount was superseded by a sublimit of losses caused by flood—$5 million in this case.
“For delay in completion losses caused by a peril not otherwise limited, the policy would provide coverage up to the full $7 million amount,” Zurich’s brief stated. “Here, however, the peril causing the loss is flood. Accordingly, the loss is limited to $5 million.”
Kornreich agreed, stating that “the delay in completion endorsement clearly and unambiguously states that it does not alter the sublimits in the policy.”
“If the cause is something other than a flood (i.e. a terrorist attack, which has a $108 million sublimit), the full $7 million would have been available,” she wrote. “However, where, as here, the cause of loss has its own, lower aggregate limit, the lower limit applies.”
James Murray and Jared Zola, partners for Dickstein Shapiro, represent El-Ad. Philip Silverberg and Mark Katz, partners for Mound Cotton Wollan & Greengrass, represent Zurich insurance. The attorneys declined to comment.