Trust had not begun to rebuild.
The Trust argued, however, that waiting for the appraisal value delayed
rennovation. The two parties filed cross-motions for summary judgment.
“The Trust cannot maintain a claim for breach of contract based upon a
payment that occurred in March 2011, prior to when the parties fully engaged in
the appraisal process provided for in the Policy,” said the district court.
In the 2017 appeal, the Eighth Circuit panel solidified the court’s ruling.
“The court was unpersuaded by the trust’s argument that CIC’s
undervaluation of the ACV prevented the trust from rebuilding or that the
additional $256,000 ACV would have caused the trust to start the rebuilding
process,” the panel said, concluding that CIC did not have to pay the remaining
SCORECARD: Cincinnati Insurance Company is off the hook for additional
replacement cost fees.
TAKEAWAY: If a policy requires action on the insured’s part and the insured
does not abide by the written policy, then insurers are likely to gain the legal
SUBLIMIT DOES NOT APPLY TO FLOOD LOSS
In october 2012, superstorm sandy wreaked havoc on the eastern coast of the United States. New Jersey Transit suffered extensive damage to its tracks, bridges, tunnels and power stations, which it immediaely reported.
NJ Transit sought $400 million
in coverage for windstorm damage,
but its excess insurers claimed the
damage was caused by flooding
and invoked a $100 million flood
NJ Transit took underwriters
from the seven excess insurance
carriers — including Lloyd’s of
London, Ironshore Specialty
Insurance Co. and Torus Specialty
Insurance Co. — to court. The
transit service argued that the water damage came from a “named windstorm”
and not from storm surge, as the defendants alleged.
The excess insurers defined storm surge as a “surge of water,” which fell under
the policies’ definition of flood.
The judge was not convinced: “Here there is no real dispute that New
Jersey Transit’s water damages were caused by Superstorm Sandy ... a named
windstorm,” the judge said.
“Thus, this court finds that the flood sublimits in New Jersey Transit’s policies
do not apply.”
TRAILER NOT A WAREHOUSE
A temporary storage trailer was stolen from LaptopPlaza in December 2013. Approximately $711,000 worth of goods were inside. The company held a warehouse insurance policy through Starr
Indemnity & Liability Co. and brought the case before the insurer. Starr,
however did not believe its policy should cover a temporary trailer, because it was
not technically a warehouse.
LaptopPlaza argued that the trailer was a temporary solution
while it renovated its Miami-based warehouse. The
trailer, therefore, was being used in a warehousing
capacity, argued the company.
Starr followed Black’s Law
Dictionary’s definition: a warehouse
is a “building used to store goods
and other items.” LaptopPlaza
argued that Merriam-Webster’s
Collegiate Dictionary defined
warehouse as a “structure or room
The Second Circuit court of New York said, “The trailer fits neither
definition. It is not a building. Nor does it fit the latter definition, as a trailer is
designed for the transportation, and not the storage, of merchandise.
“LaptopPlaza has offered no persuasive argument that the trailer in this case
… should be considered a ‘warehouse,’ ” it continued.
In its appeals brief, LaptopPlaza explained how the company recently
updated its policy with Starr in November 2013, because it moved locations.
The warehouse coverage was modified during this change, said LaptopPlaza. It
pointed to a policy clause covering property that was not within the warehouse
but was warehoused elsewhere — off premises. The court, however, said this
clause did not apply; the trailer was on the premises.
The court determined the stolen goods were not covered under property
damage insurance; the definition of warehouse did not apply to the trailer.
SCORECARD: Starr is not responsible for the loss of the stolen merchandise.
The trailer was not defined as a warehouse under the insurance policy.
TAKEAWAY: When taking measures outside of normal business operations,
get clear advice on how it might impact coverage.
TORNADO DAMAGES PARTIALLY COVERED
A building was destroyed by a 2010 tornado. Olga Despotis Trust, the building’s owner, held a policy with Cincinnati Insurance Company. In February 2011, the Trust claimed the loss of the building, valuing
the actual cash value (ACV) at $1.4 million. CIC determined that the ACV
of the building was $800,000, and issued a check for that amount. The Trust
insisted the additional funds were due.
In April 2011, a court-ordered appraiser determined that the total amount of
replacement cost equaled $1.5 million, with the lost rent income at $94,000. The
ACV of the building was estimated at slightly more than $1 million.
CIC paid the ACV but did not pay the replacement cost value, believing it
didn’t need to pay for replacement costs. In its policy, CIC required damaged
properties to begin renovation within two years of the date of loss. By 2015, the
SCORECARD: A $100 million sublimit for flood losses does not apply to NJ
Transit’s claim for coverage of Superstorm Sandy damage. Excess insurers
will be responsible for covering windstorm damage.
TAKEAWAY: A surge of surface water may be considered flood, but where
that surge is caused by another independent peril, such as a named
windstorm, then a flood sublimit will not apply.