Second Circuit Affirms a Southern District Decision Construing “Covered Location” Narrowly

In January, the Southern District rejected an insured’s $2 million claim for a generator destroyed by Superstorm Sandy.  The unit was in the basement of an office building in lower Manhattan, but the contract of insurance defined “covered location” to mean the 33rd floor of the structure.  The district court rejected the policyholder’s argument that language insuring personal property “in buildings or structures at a ‘covered location’ “ extended coverage to the entire building including its basement.  On October 16th, a panel of the Court of Appeals affirmed this carrier-friendly interpretation in Jane Street Holding, LLC v. Aspen American Ins. Co., — Fed.Appx. –, 2014 WL 5287051, 2014 U.S. App. LEXIS 19905 (2d. Cir., Oct. 16, 2014).

shutterstock_110443643Jane Street Holding, LLC was a trading company with offices in One New York Plaza in lower Manhattan.  On September 2, 2011, it purchased a commercial property policy from Aspen American Insurance Company for the 2011-2012 policy year.  Jane Street subsequently bought a $2.2 million generator and installed it in the basement of One New York Plaza.  The policy was renewed “as expiring” on September 2, 2012, and the generator was totally destroyed when Superstorm Sandy struck on October 29, 2012 and flooded Lower Manhattan.

The contract of insurance afforded $15 million in coverage for business personal property, $10 million in coverage for Electronic Data Processing Equipment, and $15 million in coverage for Equipment Breakdown,  and the generator was covered property as defined by all three coverage parts.  However, the governing policy language defined covered personal property as Jane Street’s “business personal property in buildings or structures at a ‘covered location’ or in the open (or in vehicles) on or within 1,000 feet of a ‘covered location.’ “  If the contract of insurance contained a Scheduled Locations Endorsement as Jane Street’s policy did, “covered location” was then defined to mean “a location that is described on the Location Schedule” of the endorsement.  In this case, the location schedule listed “One New York Plaza, 33rd Floor, New York, N.Y. 10004” as the “covered location.”

Aspen American denied Jane Street’s claim for the generator because the unit was not at a “covered location” as defined, and the policyholder brought suit in federal court in New York.  In January, the Southern District’s Judge Robert W. Sweet granted Aspen American’s motion for summary judgment in Jane Street Holding, LLC v. Aspen American Ins. Co., 2014 WL 28600, 2013 U.S. Dist. LEXIS 182110 (S.D.N.Y., Jan. 2, 2014) after canvasing New York law in some detail.  The district court rejected Jane Street’s argument that the phrase “in buildings or structures at a ‘covered location’ “ encompassed One New York Plaza in its entirety, holding instead:

The “buildings or structure” language distinguishes property inside the building from property in the open.  The phrase “in buildings or structures at a ‘covered location’ or in the open” clarifies that the coverage extends to property (a) that is at a “covered location” within a building or structure; or (b) in the open on or within 1,000 feet of the “covered location.”

 The result was that Jane Street’s recovery was limited to the contract of insurance’s $50,000 sub-limit for property “at locations that are not described in the Locations Schedule.”

Two weeks ago, the Second Circuit affirmed in a brief Summary Order, explaining its rationale as follows:

The plain meaning of the policy is that: property inside a building or structure that is on the 33rd floor of One New York Plaza is covered (along with property in the open, or in vehicles, on or within 1,000 feet thereof) [.] . . .  Jane Street’s flood-damaged generator was located in One New York Plaza’s (unscheduled) basement and not on the building’s (covered) 33rd floorThe policy required no more of Aspen than the $50,000 payment that it tendered to Jane Street.

(emphasis added).

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About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
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