Property insurance policies commonly contain a “Named Storm” deductible, which provides for a substantially higher deductible than other causes of loss. For example, the policy in AFP 104 Corp. v. Columbia Casualty Company1 contained a base deductible of $10,000 and a Named Storm deductible of $1 million per occurrence.
In AFP 104 Corp., the insured claimed damages in the amount of $774,562.32 for direct property damage and time element losses related to the interruption of electrical services following the storm. The carrier denied coverage for AFP’s claim on the grounds that the total loss did not exceed the applicable Named Storm deductible of $1 million per occurrence. AFP thereafter brought suit against Columbia and Columbia filed a motion to dismiss based on the Named Storm deductible.
The policy defined “Named Storm” as:
A storm that has been declared to be a named tropical storm or hurricane by the U.S. National Weather Service or other government authority including hurricane or tropical storm spawned tornado(s) or microburst(s). The named tropical storm or hurricane ends when the National Weather Service officially declares the named tropical storm or hurricane permanently downgraded to a tropical depression.
AFP claimed that upon landfall in New Jersey, Sandy was characterized as a post-tropical storm, and thus it was not a “tropical storm or hurricane” as defined in the policy and the Named Storm deductible was never triggered.
Ultimately, the Court denied Columbia’s motion to dismiss, finding that AFP had sufficiently alleged a facially plausible claim that AFP was entitled to coverage under the policy.
While this opinion did not resolve the question of whether Superstorm Sandy was a Named Storm as defined by the policy, it did find that the insured could pursue its claim and offer evidence to show that the Named Storm deductible was wrongfully applied to its claim.
Whether a Named Storm deductible applies to a claim and how the courts decide this issue could mean the difference of thousands of dollars for insureds.