The court decided that the policy's flood exclusion, despite being poorly located within the policy, barred coverage for loss caused by flood. Great Lakes Int'l Trading Inc. v. Travelers Prop. Cas. Co., 2014 U.S. Dist. LEXIS 165378 (D. Conn. Nov. 26, 2014).
Hurricane Sandy caused flood waters from the Hackensack River in New Jersey to inundate a warehouse where the insured had imported food products stored for sale in the United States. High winds also sheared open parts of the warehouse's roof, allowing extensive rainwater to enter the building.
The insured had a "Marine Open Cargo Policy" with Travelers. The policy's separate "Warehouse Coverage" endorsement included up to $5 million of coverage for goods at the warehouse. The endorsement provided that "the peril of Flood is excluded" from coverage for the New Jersey warehouse location.
Travelers paid the insured nearly $900,000 for damages caused by rainwater entering the warehouse through openings in the roof. But Travelers denied payment for losses of about $650,000 that it believed were caused from the river's flood waters.
The parties cross-moved for summary judgment.The insured argued that the flood exclusion was not located in the part of the Warehouse Coverage endorsement that listed other exclusions. Instead, the exclusion appeared at the very end of the endorsement without its own paragraph number or sub-heading. The exclusion appeared under a sub-heading for "Earth Movement Sublimit & Deductible," which also referred to sublimits and deductibles for losses stemming from "earth movements" such as earthquakes. Therefore, the insured argued that the flood exclusion applied only when an earthquake or other earth movements induced a flood.
The court ruled that although the flood exclusion could have more appropriately been set off from other text and located elsewhere in the endorsement, its wording as a flood exclusion was clear.
The insured also argued that coverage could exist despite applicability of the flood exclusion under the efficient-proximate-cause or concurrent-causation doctrines. But the exclusion applied to a "flood" without limitation. Floods were not spontaneous and might always be ascribed to underlying causes. It would defeat the purpose of a flood exclusion if a plaintiff was permitted to circumvent it by means of attributing a classic flood to non-excluded sources. Here, there were not two independent causes of the insured's damages at play. The only force that damaged the plaintiff's property was flood.
