A New York City fuel oil terminal owner that suffered nearly $2.28 million losses in Superstorm Sandy paid a deductible of $250 000 and not the $2.49 million contended for by their insurer. The wording made all the difference.
A commercial property policy provided $2.5 million in annual coverage for flood losses. The insured was required to pay a deductible of 2% of the “total insurable value at risk per location” or at least $250 000, before any flood losses would be paid. The issue was whether the value of the terminal property of $124.7 million or only the $2.5 million available for flood coverage should be used to calculate the 2% deductible.
On the insurer’s contention, the deductible would be $2.49 million so there would effectively be no cover. The policy also included a disclaimer that the $124.7 million value of the property was for “premium purposes only”. The policy did not say that the value would be used to calculate the deductible.
The court therefore applied the “value at risk” of $2.5 million.