No Business Loss Coverage for Sandy Flooding

A Southern District Court judge ruled that an insurer was not required to pay lost business coverage after Superstorm Sandy due to a flood provision contained in the policy. In this case, a law firm sought coverage from its insurer when its lower Manhattan office was evacuated due to flooding from the Sandy Storm.

The insured law firm sought coverage under the policy’s civil authority provision and moved for summary judgment while the insurer cross moved for summary judgment because flood was not a covered cause of loss. The city mayor had ordered evacuation of the area where the firm was located and access to the firm’s office was prohibited by the evacuation order. The order was issued as a result of flooding in the area of the office. The order prohibited the firm from re-entering the office for almost two months, and the firm sought to recover lost income for that period.

The court found that there was no coverage because the evacuation order was based on flooding, which did not fall under the policy’s definition of a covered cause of loss. The court also dismissed the firm’s bad faith claims. Accordingly, summary judgment was granted to the insurer.

Bamundo, Zwal & Schermerhorn, LLP v. Sentinel Ins. Co. LTC., United States District Court for the Southern District of New York, No. 13-cv-6672, March 27, 2015.

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