In Riccio v. Allstate Co., plaintiffs’ home was located in an area designated as a “Special Flood Hazard Area” by the National Flood Insurance Program. Plaintiff had maintained flood insurance on the property with Allstate, but allowed the flood coverage to lapse after 2008 when they paid off their mortgage and were no longer obligated to carry it.

On October 29, 2012, Superstorm Sandy struck New Jersey and flooded plaintiff’s home, causing extensive damage. Plaintiffs subsequently submitted a claim to Allstate. However, the plaintiffs’ homeowner’s policy contained an exclusion for property damage arising from flooding. An adjuster inspected plaintiff’s property on behalf of Allstate. The adjuster observed that the majority of the property was damaged as a result of flooding, but also indicated that there was minor wind damage to the property as well. Allstate issued a payment to plaintiff for $975.22 for wind damage and closed the file on their claim.

Plaintiffs appealed, claiming that their loss had been “initiated” by a flood, but the last event that caused the damage was the “substance in the water, not a flood.” However, Allstate denied coverage. Plaintiffs filed suit against Allstate, but the trial court granted summary judgment in favor of Allstate concluding that the flood exclusion barred coverage for plaintiff’s damages. Plaintiffs subsequently appealed.

The appellate court interpreted the language of the policy according to its “plain and ordinary meaning.” It concluded that damage caused by a flood were clearly excluded within the policy and that flood damage includes not only the damage caused by the water, but also the toxic substances carried by the flood waters and left behind after the water recedes. The appellate court noted that to interpret the language otherwise would render the flood exclusion in the policies meaningless.  Thanks to Steve Kim for his contribution to this post.  Please email Brian Gibbons with any questions.