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A federal district court in New Jersey has ruled that agarden-level apartment actually was a basement — by .13 inches— for purposes of a standard flood insurance policy issued underthe National Flood Insurance Program.

Claim under NFIP

Michael Marshalek, the owner of a two-bedroom garden-levelcondominium unit in a residential building at 736 Garden Street inHoboken, New Jersey, alleged that his unit had sustainedflood-related damage as a result of Superstorm Sandy on October 29,2012.

Mr. Marshalek and Trinova Garden Street Condominium Associationfiled a claim under the standard flood insurance policy issued toTrinova by Wright National FloodInsurance Company under the National Flood InsuranceProgram.

Wright assigned an independent adjuster to investigate theclaim. The adjuster recommended payments of $21,264.47 (afterdeduction of the policy's $5,000 deductible) and $3,672.19 toTrinova to repair damage to Mr. Marshalek's unit.

Wright subsequently made the recommended payment of $21,264.47to Trinova, but did not make the $3,672.19 payment.

Independent adjuster, engineer findings

It also denied requests by Trinova and Mr. Marshalek foradditional insurance benefits under the policy, based on thefindings of both the independent adjuster and an engineer retainedby Wright that Mr. Marshalek's unit was a “basement” as that termwas defined in the policy, which limited the benefits payable toMr. Marshalek under the flood insurance policy.

Trinova and Mr. Marshalek disputed the determination that Mr.Marshalek's unit was a basement and they sued Wright. In theircomplaint, Trinova and Mr. Marshalek sought a declaratory judgmentregarding Wright's obligations under the policy, as well as damagesfor its alleged breach of contract.

Argument: Part of unit was not below ground

At trial, Trinova and Mr. Marshalek contended that Mr.Marshalek's unit was not a “basement” as defined under the policybecause one side of his unit was not below ground level.

Mr. Marshalek submitted measurements he had made. In addition,Trinova and Mr. Marshalek hired Andre Schan “to determine therelative elevation of the floor inside Mr. Marshalek's condominiumand the outside ground. And to . . . determine whether or notthere's outside ground that is lower than the floor and where itis.”

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The court accepted Mr. Schan as an expert in the field of landsurveying. He opined that the floor in the second bedroom of Mr.Marshalek's residence was above grade, and that Mr. Marhalek'sresidence, therefore, was not below grade on all sides (as requiredfor it to be deemed a basement).

Engineer's expert testimony

The court also accepted John Garner, licensed as an engineer inNew Jersey and 45 other states, as an expert in the field of civilengineering.

Mr. Garner prepared a diagram of Mr. Marshalek's unit, measuredto scale, using AutoCAD software. He used a rotary laser device totake measurements at Mr. Marshalek's property. He took multipleelevation measurements in connection with Mr. Marshalek's property,including measurements at the street, sidewalk, and patio in frontof Mr. Marshalek's residence; multiple points inside the residence;the rear patio and backyard of Mr. Marshalek's unit; and thebackyard of the property located at 205 8th Street and the propertylocated at 738 Garden Street.

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One exhibit Wright submitted to the court was a table of theelevation measurements that Mr. Garner had made at the site, andanother was a reproduction of the AutoCAD diagram that Mr.Garner had prepared, with the elevation measurements for variouspoints listed.

Mr. Garner determined that the relative elevation of the floorof the second bedroom in Mr. Marshalek's residence was 97.1 feet.He entered the backyard of the property located at 205 8th Streetand determined that the relative elevation of the ground in themiddle of the yard was 97.30 feet, while the relative elevation ofthe yard at the right rear corner of Mr. Marshalek's building— the approximate spot that Mr. Schan and Mr. Marshalek hadmeasured — was 97.34 feet.

Extensive measurements

Mr. Garner calculated the elevation of the yard at theright rear corner of Mr. Marshalek's building by measuring theheight of the fence from both sides with an electronic tape measureand then using the top of the fence as the “tie point” to themeasurements he had taken with his rotary laser device.

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Mr. Garner determined that the elevation of the ground at theright rear corner of Mr. Marshalek's building was .24 feet (or 2.88inches) higher than the floor in Mr. Marshalek's secondbedroom.

Mr. Garner opined that, taking all of his measurements intoconsideration, he did not find any portion of Mr. Marshalek's unitthat was above grade.

Mr. Garner testified that his rotary laser device had a marginof error of a quarter of an inch over “a long distance” (i.e. 40feet), but that, with the short distances involved in themeasurements he took in this case, the potential margin oferror would be “almost negligible.”

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Mr. Garner also testified that there could have theoreticallybeen a margin of error of a quarter of an inch in connection withhis measurements of the height of the fence between Mr. Marshalek'sproperty and the backyard of 205 8th Street, given the roughness ofthe top of the fence.

The flood insurance policy

The flood insurance policy issued by Wright provided coveragefor, among other things:

direct physical loss by or from flood to [t]he residentialcondominium building described on the Declarations Page at thedescribed location, including all units within the building and theimprovements within the units

, subject to the policy's terms, conditions, and exclusions.

It defined: basement as:

Any area of the building, including any sunken room orsunken portion of a room, having its floor below ground level(subgrade) on all sides.

Court's reasoning

The court ordered judgment in favor of Wright.

In its decision, the court ruled that, considering “theequipment and methodologies that Messrs. Marshalek, Schan andGarner employed,” of the three sets of measurements concerning therelative elevation of the floor in the second bedroom of theresidence and the ground outside of the rear right corner of theresidence, those of Mr. Garner were “the most persuasive andcredible.”

The court noted that Mr. Garner had testified that themeasurements underlying his determination involved a certain marginof error — specifically, he admitted that although themeasurements he took with his rotary laser might have a margin oferror of a quarter of an inch each over long distances (i.e., 40feet), the margin of error would be “almost negligible” inthis case, given the short distances involved. The court said thatnothing in the record contradicted Mr. Garner's testimony regardingthe “almost negligible” margin of error associated with his rotarylaser measurements in this case.

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It then pointed out that Mr. Garner also admitted that theretheoretically could have been a margin of error of up to a quarterof an inch inherent in his measurements of the height of the fencebetween Mr. Marshalek's property and the backyard of 205 8thStreet, given the roughness of the top of the fence. The court,therefore, assumed without finding, that Mr. Garner's ultimatemeasurement was off by .25 inches.

Decision of inches

The court then reasoned that although Mr. Garner found that theelevation of the ground at the right rear (northwest) corner of Mr.Marshalek's residence was 2.88 inches higher than the floor in Mr.Marshalek's second bedroom, that measurement did not account forthe fact that the hardwood floor in place at the time of SuperstormSandy was higher than the tile floor that replaced it. The courtsaid that, assuming that the hardwood floor was 2.5 inches higherthan the tile floor that replaced it, the hardwood floor “wouldstill have been .38 inches lower than the adjacentground.”

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Accounting for the margin of error of .25 inches (which, thecourt observed, could have affected Mr. Garner's measurement ineither direction), the court concluded that the hardwood floor inMr. Marshalek's second bedroom still would have been at least .13inches lower than the adjacent ground at the time of SuperstormSandy, and his unit was a “basement” for purposes of his floodinsurance policy.

The case is Trinova Garden Street Condominium Ass'n v.Wright National Flood Ins. Co., No. 2:15-4195 (JAD) (D.N.J.Aug. 30, 2017).

Steven A. Meyerowitz, Esq., is the directorof FC&S Legal, the editor-in-chief of the InsuranceCoverage Law Report, and the founder and president of MeyerowitzCommunications Inc. Email him at [email protected].