Madelaine Chocolate Novelties, Inc. v. Great Northern Insurance Company, 1:15-cv-05830

Background

Madelaine Chocolate sustained extensive building, inventory, and business-income losses from Superstorm Sandy (Oct. 29, 2012) and submitted a proof of loss > $53M; Great Northern paid ≈ $4M and denied the remainder under the Policy's Flood Exclusion.
The Policy is an "all-risks" commercial property policy with coverage for direct physical loss by a "peril not otherwise excluded" and business-income coverage "caused by or resulting from" covered peril loss.
The Policy includes a Flood Exclusion containing an anti-concurrent-causation (ACC) clause excluding loss caused by flood "regardless of any other cause ... that contributes concurrently to ... the loss."
A Windstorm Endorsement (simultaneously executed) defines "windstorm" to include wind-driven rain and contains its own ACC clause, plus higher windstorm deductible and longer waiting period for business income losses.
On prior appeal the Second Circuit held the Windstorm Endorsement adds an ACC clause to the definition of a covered peril for the entire Policy and remanded to assess whether that creates a conflict/ambiguity with the Flood Exclusion.
On remand the district court found the Policy ambiguous as to whether wind-caused losses are covered when a flood concurrently contributes, and held extrinsic evidence raises triable issues of fact; denied both parties’ summary-judgment motions.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does the Windstorm Definition (with ACC clause) apply to the Policy’s coverage grants (i.e., to "peril"/"covered peril")?	Windstorm is a "covered peril," so its definition (including ACC) is incorporated into coverage grants.	Windstorm definition applies only where the term "windstorm" appears; it does not alter general coverage grants.	Court: Windstorm Definition applies to the Policy generally, including where "peril/covered peril" is used.
Does applying the Windstorm ACC clause create a conflict or ambiguity with the Flood Exclusion’s ACC clause?	Windstorm ACC supersedes or renders Flood Exclusion inapplicable; any ambiguity must be resolved for insured.	The Flood Exclusion unambiguously bars coverage; no ambiguity exists.	Court: Application creates a genuine ambiguity—"dueling" ACC clauses and other policy language can be reasonably read two ways.
If ambiguous, can the court resolve the ambiguity as a matter of law (contra proferentem)?	The endorsement controls; ambiguity should be resolved for the insured as a matter of law.	Even if ambiguous, extrinsic evidence establishes the parties’ intent favoring insurer.	Court: Ambiguity cannot be resolved as a matter of law; extrinsic evidence creates triable factual disputes.
Did the Windstorm Endorsement "supersede" the Flood Exclusion because it was an endorsement?	Yes—endorsement language controls conflicting printed terms.	No—the endorsement was not separately negotiated and was incorporated simultaneously; it does not automatically supersede.	Court: Endorsement did not supersede the exclusion as a matter of law because it was not shown to be separately negotiated.

Key Cases Cited

Tolan v. Cotton, 572 U.S. 650 (discussing summary-judgment standard and drawing inferences for nonmovant)
Andy Warhol Foundation for Visual Arts, Inc. v. Federal Ins. Co., 189 F.3d 208 (2d Cir. 1999) (ambiguous policy language permits resort to extrinsic evidence)
Wards Co., Inc. v. Stamford Riveway Assocs., 761 F.2d 117 (2d Cir. 1985) (ambiguity requires that provisions be "susceptible of at least two fairly reasonable meanings")
U.S. Fidelity & Guaranty Co. v. Fendi Adele S.R.L., 823 F.3d 146 (2d Cir. 2016) (court must give fair meaning to all policy language and avoid rendering clauses meaningless)
Beazley Ins. Co., Inc. v. ACE American Ins. Co., 880 F.3d 64 (2d Cir. 2018) (exclusions must be clear and unmistakable; construed narrowly)