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NJ Transit wins $400mn Superstorm Sandy coverage lawsuit

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New Jersey Transit has won a coverage lawsuit against Lloyd’s and eight other insurers over damage to the railway network caused by Superstorm Sandy in 2012.

Chief Justice Rabner and Justices LaVecchia, Albin, Patterson, Fernandez-Vina, Solomon, and Pierre-Louis of the New Jersey Supreme Court on Wednesday ruled that a $100mn flood sub-limit does not apply, and that the carriers on risk must pay the limit's loss.

NJ Transit was covered at the time of the catastrophe by a $400mn multi-layered property insurance policy program, and following the disaster sought to claim on it.

The transport network’s insurers on risk at the time, which include Maiden, RSUI, and Swiss Re subsidiary Westport Insurance, sought to partially deny the claim, because they said payouts for the damage would be subject to a flood sub-limit.

In the ruling, however, the judges rejected the argument that a sub-limit should apply, noting that carriers on risk also had differing definitions of property damage caused by flooding within their policies.

The court also concurred with NJ Transit’s argument that it was entitled to coverage over New Jersey State’s proximate cause test, which is sometimes referred to as Appleman’s Rule.

Commenting on the decision, NJ Transit’s counsel and managing partner at Cohen Ziffer Frenchman & McKenna, Kenneth Frenchman, said: “We are very pleased with the court’s decision, which will have a significant impact on coverage for water damage caused by major storms moving forward.”

A spokesperson for Lloyd’s said the market does not comment on litigation. Maiden, RSUI and Westport did not respond to a request for comment.

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