The New York Supreme Court Appellate Division recently affirmed the trial court’s grant of summary judgment in favor of Zurich American Insurance Company (“Zurich”), finding that pursuant to the plain language of the subject builder’s risk insurance policy, both the policy’s $5M flood sublimit and the flood deductible applied to losses resulting from non-physical damage, including delay-in-completion losses. EL-AD 250 W. LLC v. Zurich Am. Ins. Co., No. 15637 (N.Y. App. Div. July 7, 2015).
In October of 2012, the plaintiff insured, El-Ad 250 W. LLC (“El-Ad”) was in the process of constructing a building in Manhattan at 250 West Street (“the Property”). The Property flooded as a result of Superstorm Sandy, causing damage to the Property, and as a result, substantial delay-in-completion losses. Zurich denied coverage and El-Ad filed suit.
The builder’s risk insurance policy issued by Zurich to plaintiff, El-Ad provided $115 million in coverage per occurrence, subject to a $7 million sublimit for delay-in-completion losses and a flood loss deductible of $250,000 or 5% of the loss, whichever was higher. Flood loss was defined under the policy as, “all losses or damages arising” during a flood. EL-AD 250 W. LLC v. Zurich Am. Ins. Co., 988 N.Y.S.2d 462, 467 (Sup. Ct. 2014).
In moving for summary judgment, El–Ad argued that the flood loss limit and deductible only applied to physical damage to the Property caused by a flood and not so-called “downstream” financial losses, such as delay-in-completion loss. Zurich disagreed arguing that the policy clearly defined flood loss as “all losses” and not solely physical losses, thus the $5 million cap applied, as did the deductible.
The trial court agreed with Zurich’s interpretation of the policy and granted summary judgment in its favor. The Appellate Division affirmed, noting that El-Ad’s interpretation would render the flood limit meaningless with respect to the delay-in-completion coverage.