New Jersey Restaurant Loses Bid for Superstorm Sandy Insurance Coverage

The owner of a restaurant in Liberty State Park that was temporarily closed for several weeks by order of New Jersey officials after Superstorm Sandy has had its claim for payment under the “civil authority” provision in its insurance policy rejected by an appellate court in New Jersey.

The Case

On October 28, 2012, at approximately 3:00 p.m., the commissioner of the New Jersey Department of Environmental Protection (“DEP”) issued an order closing Liberty State Park in anticipation of Superstorm Sandy.

All buildings within the park were closed pursuant to the DEP’s order. In addition, police blocked access to the park.

Superstorm Sandy made landfall in New Jersey the following day, on October 29, and the park remained closed to the public until November 16, 2012.

Nova Casualty Company, the insurer for Maritime Park, LLC, the owner of the Maritime Parc restaurant in the park, paid Maritime for certain losses stemming from the closure.

Maritime also sought additional coverage from Nova for loss of business income under a “civil authority” provision set forth in the Nova insurance policy.

After Nova denied coverage under that provision, Maritime sued.

The trial court determined that Maritime was not entitled to coverage under the civil authority provision of its insurance policy, and Maritime appealed.

The Appellate Court’s Decision

The appellate court affirmed.

In its decision, the appellate court explained that the Nova policy provided civil authority coverage when (1) a “covered cause” of loss caused damage; (2) the damage was to property at a location other than the insured location, but located within a mile of it; and (3) the action of a civil authority prohibited access to the property.

The appellate court reasoned that even if the DEP commissioner’s October 28, 2012 order closing the park in anticipation of Superstorm Sandy was deemed a cause of Maritime’s loss of business revenue, Maritime could not be paid under the civil authority provision unless the circumstances involved a “covered claim of loss.”

The appellate court then pointed out that the policy’s definition of a “covered claim of loss” contained various exclusions, including one for “loss or damage caused directly or indirectly” by specified exclusions, including water infiltration, sewage back-up or overflow, and waterborne material that had been carried or moved.

Moreover, the appellate court added, the policy stated that such loss or damage was excluded “regardless of any causes or events that constitutes concurrently or in any sequence to the loss.” This “anti-concurrent causation clause,” the appellate court continued, barred coverage when two identifiable causes – one covered and one not covered – contributed to a single loss. The appellate court then found that one of the reasons the park was kept closed for several weeks – if not the sole reason – was the flood waters that overflowed portions of the park. According to the appellate court, the flood waters, combined with wind and other factors, caused debris to be moved about the park, including large objects that impeded safe access to Maritime.

The appellate court said that it was “inconsequential” that Maritime’s property itself was not damaged by flooding. Due to the anti-concurrent cause provision, the appellate court ruled, the civil authority language afforded no coverage where the restrictions on park access “were produced, at least in part, by flooding.”

Finally, the appellate court concluded, it was immaterial that the park was not actually flooded when it closed in anticipation of the storm on October 28 because the civil authority provision in the Nova policy provided that coverage began “72 hours after the time of the first action of civil authority that prohibits access to the described premises.”

The case is Maritime Park, LLC v. Nova Casualty Co., No. A-3554-17T2 (N.J. App. Div. Super. Ct. March 29, 2019). Attorneys involved include: Lee Law Firm, LLC, attorneys for appellant (Edward H. Lee, on the brief); LeClair Ryan, PC, attorneys for respondent (John P. Malloy, on the brief).