The insurers were granted summary judgment on three issues regarding Amtrak's claim for damages caused by Hurricane Sandy. Amtrak v. Aspen Sec. Ins. Co., 2016 U.S. App. LEXIS 16074 (2nd Cir. Aug. 31, 2016).
Hurricane Sandy caused flooding which damaged two of Amtrak's tunnels under the East and Hudson Rivers. Seawater from the flooding caused extensive damage to equipment in the tunnels. The district court granted summary judgment to the insurers on the following issues: (1) the damage caused by an inundation of water in the tunnels was subject to the policies' $125 million flood sublimit; and (2) the corrosion of equipment after Amtrak pumped out the seawater was not an "ensuing loss" and therefore was also subject to the flood sublimit.
Various policies offered different definitions of "flood." Some of the policies did not include within the definition of flood "sea surge" and "wind driven water." Therefore, Amtrak argued the wind-driven tidal surge did not fall within the definition. The court disagreed. The policies' definitions of "flood" were sufficiently broad to include an inundation of seawater driven by storm surge or a wind storm under their plain meaning. Consequently, the $125 million flood sublimit applied.
The ensuing loss clause provided that: "Even if the peril of flood . . . is the predominant cause of loss or damage, any ensuing loss or damage not otherwise excluded herein shall not be subject to any sublimits." The court noted that coverage for an ensuing loss directly related to the original excluded risk was not allowed. Amtrak contended that the corrosion of its metal equipment was caused by a "chloride attack" arising from the combination of seawater residue with oxygen in the air, and thus an "ensuing loss" that was not subject to the flood sublimit. The corrosion began only after Amtrak pumped the seawater out of the tunnels. The court found Amtrak's interpretation of the ensuing loss clause so broad that it would contravene the flood sublimit's purpose. Therefore, damage due to the corrosion was also subject to the $125 million flood sublimit.