Cleary Sues Insurer Over Loss of Business After Sandy

, New York Law Journal

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One Liberty Plaza
One Liberty Plaza

Cleary Gottlieb Steen & Hamilton claims it lost more than $3 million in business income as a result of Superstorm Sandy and is asking a Manhattan Supreme Court judge to force its insurance company to pay up.

"Rather than make good on its obligations to its insureds, the insurer has adopted an untenable reading of the policy to disclaim coverage for the insured's resulting loss of business income," Cleary said in its motion for partial summary judgment in a suit filed in November.

Several midsize and small firms have sued their insurers over Sandy claims, but Cleary Gottlieb is among the largest New York firms to pursue litigation.

Cleary said its main office at One Liberty Plaza and two ancillary downtown offices, 22 Cortlandt St. and 83 Maiden Lane, lost electricity, steam and telephone service after Hurricane Sandy caused a storm surge in fall 2012, according to Cleary Gottlieb v. Federal Insurance Co., 653829/2013 in Manhattan Supreme Court (See Complaint).

The firm said its main office was closed for about three and a half days and it continued to be affected by the loss of utilities. In all, Cleary, which generated about $1.13 billion in gross revenue in 2012, according to The American Lawyer, said the office closures resulted in a loss of more than $3 million in business income.

The firm paid insurer Federal Insurance Co. "several hundred thousand dollars in premiums" for a policy that covered lost business caused by a loss of utilities due to flooding, said Cleary partner Jonathan Blackman in court papers.

Cleary said the related policy limit is $6.5 million.

The suit before Justice Marcy Friedman (See Profile) against Federal Insurance Co., a Chubb Corp. subsidiary, claims breach of contract. At issue is whether an endorsement to the policy voids a flood exclusion.

The policy provides no coverage if the physical loss or damage is caused by flood, but Cleary said the flood exclusion is "deleted" and coverage for flood damage is restored by a controlling policy endorsement.

"Although the insurer might have chosen a more straightforward manner in which to accomplish this purpose, walking step by step through the various provisions in turn makes clear that the policy does provide coverage for the insured's business income resulting from loss of utilities caused by flood," Cleary said in court papers.

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