Pillsbury Winthrop Shaw Pittman

New York state court allows policyholder to pay minimum deductible for flood loss

In a January 2014 decision that may prove valuable to policyholders in their disputes over deductibles, a New York state trial court ruled that the appropriate deductible applicable to an oil terminal operator’s $2.28m (£1.38m) Superstorm Sandy flood loss claim was the minimum deductible — thus rejecting the insurer’s position that the deductible should be calculated based on a percentage of the total value of the insured property, as such a construction would result in a $2.49m deductible and ‘render the flood damage sublimit… absolutely meaningless’.

Castle Oil Corporation, the owner and operator of a New York City fuel oil terminal with a total insurable value of $124.7m was insured by Ace American Insurance Company at the time of Castle Oil’s flood loss in October 2012. Ace’s all-risk commercial property policy had been endorsed with flood coverage subject to a $2.5m sublimit. An additional endorsement provided that the deductible for flood damage in special flood hazard areas would be ‘two per cent of the total insurable values at risk per location subject to a minimum of $250,000’…

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