The Opinion

In September 2014, Amtrak sued multiple insurance companies to recover over $1.1 billion in losses it claimed were caused by Superstorm Sandy. On Wednesday, June 24, 2015, several insurers were dismissed from the suit when U.S. District Judge Jed S. Rakoff held that the inundation of Amtrak’s property in the aftermath of Sandy fell within the “unambiguous scope” of a “flood” as defined by Amtrak’s insurance policies. Judge Rakoff further held that Amtrak’s losses arose from a single occurrence caused by flooding. These rulings limited Amtrak’s recovery to a $125 million per occurrence flood sublimit.

The court’s three-page Order on the insurers’ motions for summary judgment did not explain its reasoning, but stated that a memorandum “will issue in due course.” In their motions, the insurers sought to apply the flood sublimit for one occurrence. They cited cases holding that storm surge is a type of flood, and argued that all the damage (both salt and water) resulted directly from flooding. In response, Amtrak argued that “storm surge” and “flood” were separate and distinct perils. Amtrak also argued that salt and water damage were separate, and that salt damage qualified as “ensuing loss.” When the court ruled for the insurers, it dismissed several insurers who participated in excess layers above the $125 million flood sublimit. Amtrak has filed a motion for reconsideration.

What it Means

Judge Rakoff’s Order follows a line of opinions from other courts reaching the same conclusion: a storm surge is a flood. Rulings like this one arising from Superstorm Sandy align with many that came in the wake of Hurricane Katrina, also holding that the definition of flood includes storm surges. In addition, this Order supports applying those limits to “downstream” damages that arise out of the flood.

This post was written with contributions from Eli Litoff.