The American Samoa Power Authority (ASPA) recently filed suit against Lloyd’s and HCC International Insurance Company for failure to provide coverage for property loss caused by the earthquakes and tsunamis that struck the area in September 2009.  See Am. Samoa Power Authority v. Certain Underwriters at Lloyd’s London, et al., Civil No. 10-00546 ACK-KSC (Complaint filed Sept. 24, 2010).  ASPA is a public utility that provides electricity, water, waste-water and solid waste services to the residents of American Samoa.   

    A series of earthquakes and accompanying tsunamis hit the South Pacific last year, killing 34 people in American Samoa, 183 in Samoa, and nine on Tonga.  The complaint alleges that ASPA suffered in excess of $50 million in property losses from this disaster.  Lloyd’s policy stated no suit could be filed against it unless “legal action is started within twelve months after inception of the loss.”  Although Lloyd’s has paid $5 million, it has not explained whether further amounts would be forthcoming.  Consequently, ASPA filed suit so as not to waive its right to do so under the policy’s terms.

    The policy’s “Limits of Liability” stated that the “maximum limit of liability in a single occurrence regardless of the number of Locations or coverages involved will not exceed the Policy limit of liability of $20 million.”  The section further stated, “Each loss by Earth Movement, volcanic action, storm tidal wave, or flood within any period of 72 consecutive hours commencing during the period of this insurance shall constitute a single loss hereunder.” 

    The complaint’s first count alleged that each loss by “Earth Movement” was to be considered separately from each loss by “Flood” and the 72 hour period merely specified the duration of each loss.  It further alleged that because the losses suffered by ASPA were caused by “flood” and “Earth Movement” separately, those losses implicated two separate $20 million limits, or $40 million at a minimum.  Therefore, the complaint seeks a declaration that the Policy has a $20 million limit for losses occasioned by Flood and a separate $20 million limit for losses occasioned by Earth Movement.

    This will be an interesting case as it evolves.  Thanks to Damon Key blogging colleague, Mark Murakami (hawaiioceanlaw.com), for forwarding notice of the case.