In a Second Circuit decision, the court of appeals revived Madelaine Chocolate Novelties Inc.’s Superstorm Sandy claim against Chubb for property damage and business interruption for an additional $49 million in coverage. In overruling the lower court, the appellate court found that the lower federal court failed to properly evaluate all the relevant policy provisions.1
The district court trial judge concluded that Sandy’s storm surge is encompassed by the flood exclusion in the insurer’s “all-risk” policy which, in turn, would deny Madelaine’s claim. The appellate court however said the lower court had inappropriately relied upon multiple decisions in cases involving different policy language and hadn’t appropriately considered how various provisions in Madelaine’s policy affect the scope of the coverage. Madelaine also had a windstorm endorsement in their policy that the lower court forgot to consider whether it conflicted with the flood exclusion. The court also stated that, “in making this determination, the district court should continue to be mindful of well-established precedents requiring exclusions to be set out in ‘clear and unmistakable language’ and to be accorded a ‘strict and narrow construction.”
In Madelaine’s policy, the windstorm endorsement contained an anti-concurrent causation clause stating that windstorm coverage will apply to a loss “regardless of any other cause or event that directly or indirectly contributes concurrently to, or contributes in any sequence to, the loss.”
While the insured still has an uphill battle to win this argument, it would be a great win if the court ruled the flood exclusion and the wind endorsement were ambiguous. Any ambiguity would be favorable to the insured.
I leave you with a quote from the creator of Charlie and the Chocolate Factory, Roald Dahl, who said, “You should never, never doubt something that no one is sure of.” Hopefully the lower federal court is sure that the two clauses are ambiguous.
1 Madelaine Chocolate Novelties Inc. v. Great Northern Ins. Co., No. 17-3396 (2nd Cir. Oct. 23, 2018).