Amtrak Settles With Primary Insurers in Sandy Lawsuit

Amtrak recently reached a settlement with its primary insurers in a lawsuit in which the railroad operator sought to recoup additional proceeds for Superstorm Sandy losses from its insurers, according to court documents. Terms of the settlement were not disclosed in court papers.

According to an order signed on July 2 by U.S. District Judge Jed Rakoff from the U.S. District Court of Southern District of New York, the parties to the case have agreed to dismiss with prejudice and without costs or interest several primary insurance company defendants including Arch Specialty Insurance, Federal Insurance Company, Liberty Mutual Fire Insurance, Maxum Indemnity and Navigators Insurance.

Amtrak filed the lawsuit last September against more than a dozen insurers. Amtrak said at the time that it sued its insurers for their alleged failure to stand by the policy terms for the significant property damage that followed Sandy. The railroad operator had more than two dozen first-party all risk property policies in total from insurers, the lawsuit said.

The October 2012 storm had a substantial impact on critical Amtrak infrastructure in and around New York City, including inundating with saltwater both the Hudson River tunnel and the East River tunnel.

The settlement follows the court’s earlier ruling on June 24 that sided with the insurers’ argument. The court found that the storm surge inundation of Amtrak’s property in the aftermath of Sandy falls within the unambiguous scope of the definition of “flood” in the insurance policies at issue, in contrast to Amtrak’s argument that storm surge and flood were separate perils.

The court also ruled that Amtrak did not suffer “ensuing loss” and that Amtrak’s losses arose from a single “occurrence” as defined by the policies at issue, in contrast to Amtrak’s stance that losses were caused by multiple events and damage caused by salt in seawater were separate, ensuing loss.

The court’s decision limits Amtrak’s Sandy property loss coverage to the $125 million per occurrence flood sub-limit, out of overall policy limits of $675 million in coverage per occurrence. Accordingly, the court granted defendants’ motion for summary judgment with respect to the application of the policies’ flood and occurrence provisions and dismissed from the suit several insurers in excess layers above the $125 million flood sub-limit.

The excess insurers that were dismissed in last month’s ruling included Commonwealth Insurance Company, Maiden Specialty, Partner Reinsurance Europe plc, Steadfast Insurance, Torus Specialty and Westport Insurance, according to court documents.

The court said a memorandum explaining the reasons for these rulings would be issued in due course. Amtrak has indicated that it will appeal the dismissal of excess insurers.

“We are very pleased to have resolved our lawsuit with the primary insurance companies,” Amtrak spokesman Craig Schulz told Insurance Journal.

“Next, Amtrak will seek an appeal of the dismissal of the excess insurance companies by the district court. If the appeal is successful, we will prosecute Amtrak’s remaining claims against the excess carriers. We look forward to the appeal,” Schulz said.

The case is National Railroad Passenger Corp. v. Arch Specialty Insurance Co. et al., No.:2014-cv-07510, U.S. District Court for the Southern District of New York.