Extrinsic evidence as to the extent of a FEMA Zone created a question of fact as to a policy exclusion that excluded coverage for specified FEMA Zones.
The First Department affirmed the denial of cross-motions by plaintiff-insured and defendant-insurer for summary judgment with regard to a flood exclusion. Defendant-carrier provided property and casualty coverage for several of plaintiff’s brewery premises throughout New York City. The policy limited coverage for flooding, but specifically excluded “loss or damage to property located in “Flood Zones A or V as defined by the Federal Emergency Management Agency (FEMA).” During Superstorm Sandy, plaintiff’s premises at 93 South Street sustained substantial flood damage. When plaintiff presented its claim to defendant, defendant declined coverage because the premises was located in FEMA Zone AE, which defendant asserts is a subzone of Zone A. Plaintiff challenged this interpretation, claiming that Zone AE is not a subzone or part of Zone A, but rather is separately defined under FEMA’s regulations (44 CFR § 59.1, et seq.).
The First Department recited the following black-letter principals of insurance construction:
- The ambiguity vel non of an insurance policy term is a question of law.
- The policy provision is to be read in light of common speech and interpreted according to the reasonable expectations and purposes of ordinary business[]people when making ordinary business contracts .
- Exclusions must be specific and clear in order to be enforced (and ambiguities in exclusions are to be construed most strongly against the insurer.
- There are circumstances where extrinsic evidence may be admitted prior to an exclusion being strictly construed against an and where ambiguous words are to be construed in the light of extrinsic evidence or the surrounding circumstances, the meaning of such words may become a question of fact for the jury.
Here, the language of FEMA’s flood zone regulations raises an issue of fact rendering the insurance policy’s exclusion of flood coverage ambiguous.
Heartland Brewery, Inc. v Nova Cas. Co., 2017 NY Slip Op 02908 (1st Dep’t April 13, 2017)
http://nycourts.gov/reporter/3dseries/2017/2017_02908.htm
