Both the Third Circuit and New Jersey Superior Court have recently issued opinions interpreting the scope of coverage available for losses stemming from Hurricane Sandy. The U.S. Court of Appeals for the Third Circuit issued a precedential opinion in Torre v. Liberty Mutual Fire Ins. Co., 2015 U.S. App. LEXIS 4902, No. 14-2733 (3d Cir. March 26, 2015) clarifying the definition of “insured property” under the Standard Flood Insurance Policy. While the New Jersey Superior Court, Law Division in Public Service Enterprise Group, Inc. v. ACE American Ins. Co., Docket No. ESX-L-4951-13 (N.J. Sup. Ct. Law Div. March 23, 2015)(Vena, J.S.C.) held that a lower sublimit applicable to losses caused by “flood” did not apply to Sandy losses incurred by PSEG that exceeded $500,000,000.00, and were the result of Sandy’s “storm-surge.”
At issue in Torre was a homeowner’s claim for the costs of removing non-owned debris deposited on their property by Hurricane Sandy. The homeowners received payment for the removal of debris contained within their house, but were denied reimbursement for costs associated with removing sand and other non-owned debris from the land surrounding their home. Based on the unambiguous terms of the Standard Flood Insurance Policy, the Third Circuit held that debris removal coverage was limited to the removal of “debris that is on or in insured property.” The Court rejected the insured’s contention that the term “insured property” should be interpreted broadly to include not only structures owned by the insured, but the entire parcel of land owned by the insured. Because the Standard Flood Policy expressly states that it does not insure “land,” the homeowner’s “land” was not “insured property.” Accordingly, debris located outside of the home was not “in or on insured property” and payment was properly denied. The Court’s decision is well-grounded in the language of the Standard Flood Insurance Policy, and is another example of the limited coverage available to homeowners in designated flood zones. The plaintiffs have recently requested that the Third Circuit rehear the matter en banc.
In a significant victory for PSEG, the Superior Court, Law Division, concluded that lower sublimits applicable to losses caused by “flood” did not apply to PSEG’s damages caused by “storm surge” from Hurricane Sandy, finding instead that the policy’s full $1 Billion limit applicable to damages from “named windstorms” applied. Recognizing that no New Jersey court has addressed whether a storm surge is included in the definition of “flood,” the Court relied on several out-of-state cases supporting its conclusion that “named windstorm” included “storm surge” within its definition. In light of these decisions, and the language of the policy at issue, the Court applied what it viewed as the more specific definition of “named windstorm” to apply the higher limit for storm surge damages. An appeal is expected.