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In a recent decision arising out of Superstorm Sandy, the United States District Court for the District of New Jersey confirmed the enforceability of anti-concurrent causation provisions.  Zero Barnegat Bay, LLC v. Lexington Ins. Co., No. 14-cv-1716, 2019 U.S. Dist. LEXIS 43625 (D.N.J. Mar. 18, 2019).
Continue Reading District of New Jersey Applies Anti-Concurrent Causation Provision to Superstorm Sandy Claim

Under New Jersey law, an insurer cannot be held liable for bad faith in denying an insurance claim if the claim is “fairly debatable.” Therefore, unless a plaintiff can establish a right to summary judgment on the underlying cause of action for breach of contract, the coverage denial is considered “fairly debatable” and the court must dismiss the bad faith claim. See Pickett v. Lloyd’s, 131 N.J. 457, 473 (1993); Tarsio v. Provident Ins. Co., 108 F. Supp. 2d 397, 401 (D.N.J. 2000).
Continue Reading District of New Jersey Finds Post-Denial Communications By Insurer’s Counsel Insufficient to Sustain Bad Faith Claim

Property insurance policies typically require that the insured repair or replace damaged property before recovering on a replacement cost value (RCV) basis. Until then, the insured is entitled only to the actual cash value (ACV) of the damaged property. The U.S. District Court for the District of New Jersey recently decided a case involving the proper method of calculating the insureds’ loss under a homeowners’ insurance policy following damage to the insureds’ property from Superstorm Sandy. In Giacobbe v. QBE Speciality Ins. Co., 2018 U.S. Dist. LEXIS 77076 (D.N.J. May 8, 2018), the plaintiff insureds contended that they were entitled to the RCV of the damaged property despite the fact that they had not repaired or replaced the property. The insurer moved for summary judgment, arguing that the plaintiffs were entitled only to ACV and that the Plaintiffs failed to offer sufficient proof of damages, i.e., that the ACV exceeded what the insurer paid.
Continue Reading Scope of Recoverable Damages: District of New Jersey Finds Insureds Not Entitled to Replacement Cost Value Until Damaged Property is Repaired or Replaced

A federal court in New Jersey recently dismissed state law claims brought by third party plaintiffs, including the insured’s broker, against a Write Your Own insurance carrier. The claims at issue in Residences at Bay Point Condo. Ass’n v. Chernoff Diamond & Co., LLC, Civil Action No. 16-5190, 2017 U.S. Dist. LEXIS 56451 (D.N.J. Apr. 13, 2017) arose out of damage sustained to a condominium complex during Storm Sandy. The insured, and later its broker, claimed that Standard Fire had failed to advise that the National Flood Insurance Policy had been written on the wrong form. After the loss, Standard Fire reformed the policy and applied a co-insurance penalty.

Moving to dismiss the third party state law claims against it, Standard Fire argued that such claims were preempted by federal law. The court agreed, turning first to the Standard Flood Insurance Policy (“SFIP”) provision regarding jurisdiction, which states that “all disputes arising from the handling of any claim under the policy” are governed by FEMA regulations, the National Flood Insurance Act, and Federal common law. Noting that federal courts have previously distinguished between claims sounding in policy procurement, which are not preempted, and claims sounding in handling, which are preempted, the court found the broker’s claims to be grounded in policy handling. Central to this determination was the status of the insured’s coverage at the time of the interaction with the Standard Fire. The condo complex’s claims, and consequently the third-party broker’s claims, arose while the condo complex was insured by Standard Fire, leading the court to conclude that the claims related to handling.
Continue Reading District of New Jersey Dismisses Third Party Claims Sounding in Policy Handling on Preemption Grounds

Frequent readers of the blog will appreciate that disputes involving the application of anti-concurrent causation language in the context of claims for flood or water damage have appeared with some frequency in recent years. This increased level of cases is due in large part to the damage caused by Hurricane Irene in 2011 and Hurricane Sandy in 2012. One frequently-litigated issue concerns what, if any, coverage is available under a policy with anti-concurrent causation language when a single indivisible loss is caused by a covered peril and an excluded peril. Recent decisions in New Jersey suggest a solid consensus that such a claim is not covered.
Continue Reading New Jersey Appellate Division Applies Anti-Concurrent Causation Clause to Bar Combined Flood/Sewer Backup Claim

We have previously featured New Jersey District Court decisions addressing “unequivocal” denials in the context of policies’ suit limitation provisions. In the latest, Ryan v. Liberty Mut. Fire Ins. Co., No. 14-6308 (WHW)(CLW), 2017 U.S. Dist. LEXIS 6716, at *3 (D.N.J. Jan. 17, 2017), the Court found Liberty Mutual’s letter explaining both covered and excluded damages to constitute a “clear and unequivocal” denial.

In Ryan, the day after their home was damaged by Hurricane Sandy, the Ryans notified Liberty Mutual of a claim for the damage.  Liberty Mutual sent an independent adjuster to the property and determined that it owed the Ryans $4,784.14 for covered damages. Liberty Mutual explained the payment of policy benefits in a November 30, 2012 letter, which the Ryans received on December 10, 2012. The letter explained that Liberty Mutual would not be issuing payment for damage to a living room wall because the Ryans had been paid for damage to the wall after a previous storm, and the inspection showed that they had not repaired the damage. The letter also stated that no coverage was available for flood-related damages. 
Continue Reading Unequivocal Denial: District of New Jersey Court Outlines What is Not Necessary

As we have written about before on this blog, the water damage caused by Hurricane Sandy in October 2012 gave rise to important questions concerning the applicability of so-called “anti-concurrent causation” clauses. Such was the case in the recently-decided matter of Carevel, LLC v. Aspen American Ins. Co., 2016 U.S. Dist. LEXIS 157919 (D.N.J. Nov. 15, 2016).

In Carevel, the insured’s building in Jersey City, New Jersey suffered interior water damage during Hurricane Sandy. The relevant insurance policy excluded damage caused by flood. The flood exclusion included an anti-concurrent causation preamble with the familiar language excluding flood damage “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” Importantly for the legal issues raised in this case, the policy did cover, via endorsement, damage caused by water that backed up through sewers or drains. Following an investigation into the loss, Aspen obtained a report indicating that the interior water damage was caused by street-level flooding that had infiltrated the building during the storm. Aspen denied the claim based on the flood exclusion. The insured filed suit, claiming that the damage was caused by water that had entered the building through the basement’s sewers or drains.
Continue Reading Hurricane Sandy, Flood, and Sewer Backup: New Jersey Federal Court Confirms Anti-Concurrent Causation Bars Insured’s Claim