In a case arising from business losses due to power outages caused by flooding during Superstorm Sandy, a New York trial court found that the water damage exclusion of the insurance policy unambiguously excluded coverage for power interruptions caused by flood.

In La Casa di Arturo, Inc. v. Tower Group, et al., the policy provided coverage for loss associated with power interruptions that “result from direct physical loss or damage by a Covered Cause of Loss.” Water and flood were specifically excluded as covered causes of loss. Relying on the adjuster’s report and a Con Edison report—both of which concluded that the substation providing power to the insured’s business was damaged by flooding from Sandy—the court held that the clear and unambiguous language of the policy excluded the insured’s losses from coverage.

In La Casa di Arturo, Inc., the insured restaurant submitted a claim under its commercial and property insurance policy to its insurer for losses and damages caused by Superstorm Sandy. Specifically, the insured sought coverage for food spoilage, business interruption, and loss of business income because it had to cease business operations due to a power outage.

The insurer retained the services of an independent adjuster, who investigated the loss, and determined that the insured’s damage was caused by an off premises power outage. The adjuster concluded that the power outage was caused by flood and the insurer denied coverage for the insured’s claim. The insured then filed suit for breach of contract, bad faith and violation of General Business Law § 349.

The court found that the language of the policy was unambiguous and clearly excluded coverage for any loss caused by flood. Since the insurer presented both an adjuster’s report and an affidavit from Con Edison authenticating a report concluding that flooding at a substation caused the power outage, the court held that the insurer established it prima facie right to summary judgment dismissing the insured’s claims on the basis that the policy did not cover plaintiff’s loss. The court rejected the insured’s attempts to create ambiguity in the policy language and its argument that the Con Edison report was inadmissible.