Non-Damaged Property That Required Replacement after Superstorm Sandy Is Not Covered
February 27, 2017
A New Jersey federal district court has ruled that homeowners were not entitled to coverage for property that was not damaged by Superstorm Sandy, even if that property had to be replaced in order to work with property that had been damaged by the Superstorm. Ruth v. Selective Ins. Co. of Am., No. CV 15-2616 (JBS/JS), (D.N.J. Feb. 14, 2017).
The insurer, Selective, issued the insured, the Ruth's, a standard flood insurance policy covering their home under the “Write Your Own” flood insurance program managed by the Federal Emergency Management Academy. The Ruths unfinished basement was flooded with five feet of flood water during Superstorm Sandy.
After an adjuster inspected the property, the Ruths were awarded payment of $18,520.79 “representing payment in full under the policy” to cover the building and contents damage that the Ruth's suffered. Later, the Ruth's submitted additional documentation claiming more covered losses to their property, along with a sworn proof of loss and an estimate for repairs that totaled $45,780. This request for payment was denied because adequate supporting documents had not been submitted per the requirements of the National Flood Insurance Program. Further proof of loss was never submitted. This claim was submitted to cover the replacement of two compressors as part of the central air conditioning system and personal property located in the garage and basement. Selective moved for summary judgment, arguing that the plaintiffs were not entitled to payment for the compressors because they were not damaged in the flood, and Selective denied payment for the personal property as it was not itemized properly.
The Ruths argued that even though the compressors had not been damaged by the flood, the insurer had to pay to replace them because the Ruth's had to replace another component of the central air conditioning system, and the system would only work if the entire system was replaced at the same time. The district court was not persuaded by this argument and said that since the compressors were not damaged by flood, that the compressors were not covered losses according to the standard issue flood policy.
Editor's Note: In the past few months several insurance cases revolving around losses caused by Superstorm Sandy have been decided, including Pastabar Café Corp. v. 343 East 8th Street Associates, LLC (N.Y. App. Div. 1st Dep't Feb 21, 2017), Lend Lease (US) Construction LMB Inc. v. Zurich American Ins. Co. (N.Y. Feb. 14, 2017), and Zarour v. JPMorgan Chase Bank, N.A. No. 14-cv-06261-NLH-AMD (D.N.J. Feb 21, 2017). This case provides a pro-insurer decision, denying the insured from benefiting from the insurance policy. This decision is a necessary and important one, as a policy is put in place to allow the insured to return to the position they were in before the damage occurred, allowing the insured to recover more than was damaged in the occurrence could potentially open the floodgates for claims that would have never been covered by the policy in the past.