A New Jersey Supreme Court opinion issued on January 27, 2021 affirmed an Appellate Division decision in favor of NJ Transit over its insurers. In 2012, when Superstorm Sandy hit the New Jersey coastline, NJ Transit was covered by a $400 million property insurance plan through eleven different insurers. After Sandy damaged large amounts of NJ Transit’s property, it sought to use this insurance to help recovery efforts. To NJ Transit’s surprise, when it made its claim for coverage, the insurance carriers capped the coverage at a $100 million due to a “flood sublimit” provision contained in NJ Transit’s policies.

In response, NJ Transit filed an action for declaratory judgement against all of the insurers denying it coverage. According to the trial court, the $100 million flood sublimit did not apply to NJ Transit’s claims and therefore the trial court entered summary judgement in favor of NJ Transit. The Appellate Division affirmed this, reasoning that the “flood sublimit” provision, as well as another provision called the “named windstorm” provision, could both be read to include the storm damage in question. Ultimately, the Appellate Division decided that the “named windstorm” provision provided a more specific, clear definition of the damage in question, therefore that provision controlled and the flood sublimit did not apply.

The Supreme Court upheld this decision largely for the reasons laid out in the Appellate Court’s opinion regarding the plain language of the insurance policies. This is a big win for NJ Transit in obtaining the relief necessary to rebuild from Sandy and also provides precedent for the interpretation of insurance policies on the side of the insureds.

You can read the full text of the Appellate Decision here: https://www.courthousenews.com/wp-content/uploads/2019/11/transitinsurance.pdf (The Supreme Court did not produce a plenary opinion, stating that its decision is based wholly on the reasoning of the Appellate Division with the exception of the Appellate’s discussions regarding Appleman’s Rule and the doctrine of contra proferentem.)