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U.S. Court of Appeals Largely Affirms Insurer Win Against Amtrak in Hurricane Sandy Case, Finds Additional Issue Unripe For Resolution

Practices: Appellate & Supreme Court, Business & Commercial Litigation

The U.S. Court of Appeals for the Second Circuit granted insurers represented by Ropes & Gray a sizable victory on Aug. 31, affirming the District Court’s decision to award insurers summary judgment on two key issues. Amtrak brought the lawsuit seeking to recover over $1.1 billion in damage Amtrak allegedly sustained as a result of Hurricane Sandy, including damage to the East River and North River Tunnels, which Amtrak owns and which run into Manhattan’s Pennsylvania Station.

The Second Circuit held, as did the District Court, that (i) Amtrak’s claim fell within the definition of “flood” in the policies, meaning Amtrak’s potential recovery for flood loss was capped at $125 million by a sublimit in the policies, and (ii) any corrosion that occurred in the tunnels as a result of Sandy was part of the flood and did not fall under the exception to the flood sublimit for “ensuing loss.” The Second Circuit also held that the grant of summary judgment to the insurers on Amtrak’s claim for “DICC” coverage related to the replacement of undamaged portions of the tunnels was correct, vacating this portion of the ruling as premature insofar as Amtrak is able to prove coverage based on future events. The Court noted that Amtrak’s regulator, the Federal Railroad Administration, had not yet determined whether repairs caused by Sandy would require further modifications beyond the initially damaged portions. The court did not express a view as to whether Amtrak’s DICC claim would be successful, and noted the insurers’ argument that DICC coverage could not be “stacked” on top of the sublimited flood coverage. The appellate court ruled only that the question of DICC coverage was not yet ripe for resolution.

The insurers are represented by appellate& Supreme Court litigation partner Doug Hallward-Driemeier. Ropes & Gray also represented certain insurers in the District Court proceedings.

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