The Supreme Court of New Jersey found the policies' sublimits were not applicable to reduce coverage for property damage caused by Superstorm Sandy. N.J. Transit Corp. v. Certain Underwriters at Lloyd's London, 2021 N.J. LEXIS 4 (Jan. 27, 2021).
At the time Superstorm Sandy struck New Jersey, the New Jersey Transit Corporation (NJ Transit) had a $400 million multi-layered property policy program through eleven insurers. When NJ Transit sought coverage for water damage to its property caused by the storm, some of the insurers invoked the $100 million flood sublimit and declined to provide coverage up to the policy limit. NJ Transit filed suit for a declaratory judgment. The trial court found that the $100 million flood sublimit did not apply to NJ Transit's claims. Summary judgment was entered for NJ Transit.
The Appellate Division affirmed. The New Jersey Supreme Court affirmed the Appellate Division, largely adopting the reasoning of the Appellate Division.
The Appellate Division noted that the policies contained separate definitions for a "named windstorm." Most of the policies separately defined "named windstorm" to include "wind driven water, storm surge and flood associated with, or which occurs in conjunction" with a "named windstorm." The court reasoned that the policies did not define "flood" to include "storm surge" and "wind driven water" associated with a "named windstorm." If the parties intended that damage from a "storm surge" would be subject to the flood sublimit, the policies would have stated so in plain language.
