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Unstoppable Coverage Grant Meets Immovable Exclusion (NY)


September 12, 2019 at 6:14:14 PM

<p style="text-align: justify;">In <em><a href="">Madelaine Chocolate Novelties, Inc. v. Great N. Ins. Co.</a><a href=""></a>,</em> a New York federal court addressed how courts should resolve ambiguities in clashing insurance policy clauses.  The case arose out of a coverage dispute following damages caused by 2012 Hurricane Sandy, which decimated the Rockaway Queens-based chocolatier.</p>
<p style="text-align: justify;">Madelaine sued Great Northern for coverage after it submitted an itemized proof of loss for more than $53 million and the insurer refused to pay more than $4 million.  Both parties cross-moved for summary judgment.  Madelaine argued that the damages were covered under an endorsement defining “windstorm” and expanding coverage despite other concurrent causes.  Great Northern opposed the incorporation of the windstorm provision and further argued that coverage was precluded by the policy’s flood exclusion.</p>
<p style="text-align: justify;">In denying summary judgment, the court came down between the parties.  The court first found that the “windstorm” endorsement applied to the entire policy, extending coverage to losses caused by wind “regardless of any other cause or event that directly or indirectly contributes concurrently to, or contributed in any sequence to, the loss or damage.”  In other words, the policy covers damages by windstorms even if there are other contributing factors.</p>
<p style="text-align: justify;">Nevertheless, the court disagreed with Madelaine’s argument that this broad coverage grant supersedes the flood exclusion.  On the contrary, the conflict between the windstorm endorsement and flood exclusion created an ambiguity as to whether the damages are covered in this case. In light of this ambiguity, the court held that issues of fact existed regarding the parties' contractual intent and coverage expectations, and as a result the case should proceed to trial.  The court thus denied a quick ruling to either party.</p>
<p style="text-align: justify;">This case shows how New York courts take a balanced approach when it comes to dueling policy provisions. When strong language for granting coverage meets strong language for excluding, courts will likely avoid pat answers as a matter of law and instead dig deeper into the facts.  The takeaway for both insurers and insureds is that the record matters and to seek greater clarity with policy language.</p>
<p style="text-align: justify;">Thanks to Andrew Debter for his contribution to this post.  Please email <a href="">Georgia Coats</a> with any questions.</p>

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