124 F. Supp. 3d 264
S.D.N.Y.2015Background
- Amtrak and multiple insurers dispute coverage under all-risk policies for losses from Superstorm Sandy (Dec 2011–Dec 2012).
- Policies include primary and excess layers with a $125 million flood sublimit per occurrence; overall exposure up to $675 million per occurrence.
- Flood defined in most policies as rising/overflowing water onto normally dry land; some policies use a broader minority definition including storm surge.
- Sandy caused inundation of Amtrak tunnels (ERT and NRT) and other property; water removal left chlorides, which allegedly caused a later chloride attack on steel structures.
- Amtrak seeks coverage for water damage and chloride-related damage, and for repairs to undamaged portions of track bed and benchwalls under a demolition and increased cost of construction clause (DICC).
- Court proceedings addressed (1) flood sublimit scope, (2) whether chloride damage is ensuing loss, (3) single vs multiple occurrences, (4) coverage for undamaged portions under DICC, and (5) consequential damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does flood sublimit cover storm-surge inundation? | Amtrak: flood excludes storm-surge inundation from coverage. | Insurers: flood includes storm surge under both definitions; sublimit applies. | Flood sublimit applies; storm surge encompassed by flood definitions. |
| Is chloride damage an ensuing loss excluded from flood sublimit? | Chloride attack is a separate ensuing loss from water damage and not subject to the flood sublimit. | Chloride damage is directly related to flood; not an ensuing loss. | Chloride damage not an ensuing loss; flood sublimit bars coverage for all such damages. |
| Do Amtrak's losses arise from a single or multiple occurrences? | Chloride damages in two tunnels could be separate occurrences from the water damage. | All losses arise from a single occurrence due to a common flood trigger. | All losses constitute a single occurrence under the policy definitions. |
| Are undamaged portions of track bed and benchwalls covered under the DICC? | DICC requires coverage for undamaged parts to comply with laws/standards (ADA, FRA, fire codes). | No coverage if undamaged parts were not damaged and no applicable law/standard requiring such repairs. | No coverage for undamaged portions; not required by ADA, FRA, or local ordinances in this context; DICC not triggered. |
Key Cases Cited
- Seiden Associates, Inc. v. ANC Holdings, Inc., 959 F.2d 425 (2d Cir.1992) (contract interpretation; ambiguity standard)
- Topps Co. v. Cadbury Stani S.A.I.C., 526 F.3d 63 (2d Cir.2008) (ambiguity and contract interpretation; reasonable expectations)
- Newmont Mines Ltd. v. Hanover Ins. Co., 784 F.2d 127 (2d Cir.1986) (causation/occurrence interpretation; chain of causation)
- Narob Dev. Corp. v. Ins. Co. of N. Am., 219 A.D.2d 454, 631 N.Y.S.2d 155 (1st Dep’t 1995) (ensuing loss; relationship to original risk)
- Seacor Holdings, Inc. v. Commonwealth Ins. Co., 635 F.3d 675 (5th Cir.2011) (proximate cause; flood vs wind-driven damage)