Last year, my learned colleague, Shaun Marker, wrote a series of blogs on the ongoing litigation between El-Ad 250 West LLC and Zurich over Superstorm Sandy flood damage and delays in construction under a builders’ risk policy. You can read his articles here.

This summer, a New York Court of Appeals decided the issue in Zurich’s favor, meaning that delays in construction caused by flood are subject to the flood sublimit of the policy. The policy had limits of $115 million, with sublimits of $108 million for physical damage and $7 million for delay in completion and an aggregate limit of $5 million for damage from flood. The property suffered extensive flood damage from Superstorm Sandy which also caused the project to be delayed. The insured made a claim for the delay in completion coverage however Zurich argues that the delay in completion was caused by flood and was therefore subject to the flood aggregate limit of $5 million.

The New York appeals court ultimately ruled against the insured stating “The plain language of the delay in completion coverage form, which incorporated the policy terms by reference, applied the $5 million flood sublimit to ‘all’ losses, including nonphysical damage losses, such as those resulting from a delay in completion,” the Court further noted:. “[r]eading the coverage in such a way as to find that flood losses do not apply to delay in completion losses would render the flood limit meaningless with respect to that coverage.”

The fallout from this case is clear, delay in completion coverage will be subject to whatever policy restrictions and sublimits apply to whatever covered cause of loss actually precipitated the delay and triggered the coverage.