Fordec Realty Corp. v. Travelers Excess and Surplus Lines Company
- Andrew Carter
- 1:18-cv-00085
- U.S. District Court · Southern District of New York
- 8
In Fordec Realty v. Travelers Excess, Judge Carter upheld summary judgment for Travelers, ruling the rust exclusion barred coverage for the garage collapse.
Fordec Realty Corp. and Travelers Excess and Surplus Lines Co.; the ruling resolved whether Travelers’ policy covered damage from the partial collapse of Fordec’s parking garage.
What happened
Fordec Realty Corp. sued Travelers Excess and Surplus Lines Co. over insurance coverage for damage after a parking garage partially collapsed. Travelers denied the claim, relying on policy exclusions for collapse and rust or corrosion.
Fordec argued that an exception for hidden decay in the collapse exclusion created coverage or, at minimum, made the policy unclear. Travelers argued that the separate rust-and-corrosion exclusion independently barred coverage because rust caused the collapse.
Judge Andrew L. Carter adopted Judge Fox’s recommendation in full. The court denied Fordec’s motion for partial summary judgment and granted Travelers’ motion for summary judgment, concluding that the rust-and-corrosion exclusion was clear and applied even though the policy contained a hidden-decay exception to the separate collapse exclusion.
The detailed version
- Fordec Realty Corp. v. Travelers Excess and Surplus Lines Company · No. 1:18-cv-00085
- Andrew Carter
- Sept. 28, 2020
Background
Fordec insured a parking garage at 3000 Jerome Avenue, Bronx, New York, under a policy issued by Travelers. The policy covered the period from December 10, 2016, through December 10, 2017, and provided building coverage of at least $40,841,309. The garage partially collapsed around February 19, 2017, and Fordec submitted an insurance claim. Travelers denied coverage, asserting that the policy did not cover the cause of the damage.
The policy excluded losses caused by the collapse of buildings, but created exceptions for certain causes, including decay hidden from view. In a separate provision, the policy excluded loss caused by rust, corrosion, deterioration, and related conditions. That provision stated that it had no hidden-decay exception. The policy also provided that if an excluded cause resulted in a specified cause of loss, Travelers would pay for damage caused by that specified cause.
Travelers retained WJE Engineers & Architects, P.C. to investigate. WJE concluded that the collapse was caused by complete corrosion of connection angles and was due to rusting. The opinion states that Fordec repeatedly conceded during the litigation that rust and corrosion caused the collapse.
Motions and objections
Fordec moved for partial summary judgment, and Travelers moved for summary judgment. Judge Fox recommended denying Fordec’s motion and granting Travelers’ motion. Fordec objected, arguing that the interaction among the policy’s coverage provisions, rust-and-corrosion exclusion, and hidden-decay exception created an ambiguity that should be resolved in Fordec’s favor.
Travelers argued that even if Fordec could establish that the decay was hidden, the exception would affect only the separate collapse exclusion. Travelers maintained that the rust-and-corrosion exclusion independently barred coverage and contained no comparable exception.
Court’s analysis
Judge Carter agreed with Judge Fox that the policy was not ambiguous. Under New York law, insurance exclusions are read separately, and one applicable exclusion can defeat coverage. The court held that the hidden-decay exception to the collapse exclusion did not apply to the independent rust-and-corrosion exclusion.
The court rejected Fordec’s attempt to distinguish cases applying this rule because the garage in this case actually collapsed. Although the collapse made the collapse exception relevant, it did not eliminate the separate rust-and-corrosion exclusion. That exclusion applied whether or not a collapse occurred and unambiguously denied coverage for damage caused by rust or corrosion.
Disposition
Judge Andrew L. Carter, Jr. adopted Judge Fox’s Report and Recommendation in its entirety. The court denied Fordec’s motion for partial summary judgment and granted Travelers’ motion for summary judgment.
Read the full 8-page opinion on CourtListener, the free public archive maintained by the Free Law Project.