On the two year anniversary of Superstorm Sandy, Judge Travis L. Francis of the Superior Court of New Jersey, Middlesex County, ruled that the “[a]pplication of the Named Storm deductible for damage caused by Sandy [was] consistent with the clear and unambiguous language of the Policy.”1

Wakefern Food Corp., (“Wakefern”) “is a buying cooperative of owners/operators of Shoprite and PriceRite supermarkets that purchased commercial property insurance from Lexington Insurance Company (“Lexington”).” Following Superstorm Sandy, “Wakefern claimed over $50 million in losses.”

The Lexington policy purchased by the Plaintiffs contained a separate deductible for named storms. The policy’s subsection required, “a 2% deductible of Total Insurable Values at the time of the loss at each location involved in the loss or damage arising out of a Named Storm.” Further, the policy defined named storms as, “a storm that has been declared by the National Weather Service to be a Hurricane, Typhoon, Tropical Cyclone, Tropical Storm or Tropical Depression.”

Wakefern argued in its Motion that Superstorm Sandy was not a named storm as defined by the policy when it made landfall in New Jersey. Wakefern asserted that before Sandy hit the coast of New Jersey at approximately 8:00pm, “the National Weather Service’s Hurricane Center had declared the storm a ‘Post-Tropical Cyclone,’” which was not a weather event declared in the subsection of the policy that applies the Named Storm deductible. Wakefern also claimed that Executive Order No. 107, issued by Governor Chris Christie, “which precluded insurers from applying hurricane deductibles to claims,” applied to the loss at issue.

Lexington, countered and argued the court should apply the Named Storm deductible, “contending that the damage asserted in the claim arose out of Hurricane Sandy and therefore is subject to the deductible.” Lexington argued that “a loss arises out of a Named Storm so long as the Named Storm has a ‘substantial nexus’ to the loss and that the losses Plaintiff incurred would not have occurred but for Hurricane Sandy.” Additionally, Lexington asserted that Governor Christie’s Executive Order No. 107, “applied solely to homeowners’ insurance claims,” and not commercial insurance.

Judge Francis ruled that the Named Storm deductible should be applied and that, “[i]t [was] undisputed that damage at some Wakefern locations occurred prior to 7:00pm.” Additionally, the Court found “that the Pre-7:00pm damage while Sandy was still a hurricane created a substantial nexus between the storm and Wakefern’s total losses.” Lastly, the Court also found that Governor Christie’s Executive Order No. 107 was inapplicable to commercial losses.

Wakefern’s Named Storm deductible will be $22 million on a $54 million dollar claim.

1 Wakefern Food Corp. v. Lexington Ins. Co., No. Mid-L-6483-13 (N.J. Super. Ct. Oct. 29, 2014).