NEW ORLEANS — No coverage exists for an air-conditioning system that was damaged by Hurricane Katrina because the policies at issue clearly excluded coverage for damages caused by windstorm, a federal judge said June 20 (SJD-CC LLC v. Marsh USA Inc., d/b/a Marsh USA Risk Services, et al., No. 06-9903, E.D. La.; 2008 U.S. Dist. LEXIS 47710).
SJD-CC LLC owned and leased commercial property in New Orleans. It leased warehouse space at the property to tenants who required strict temperature controls, including East/West Wines, which stored inventory there.
Marsh USA Inc. acted as SJD’s insurance agent. For the policy year April 25, 2003, to April 25, 2004, Marsh obtained a boiler and machinery insurance policy from Travelers Indemnity Company of Connecticut that covered SJD’s loss of business income. It also obtained a separate policy of property insurance and commercial general liability insurance for the same policy year that covered SJD’s property. This policy did not provide coverage for loss of business income. The policies were renewed for another year, and on April 22, 2005, Marsh sent to SJD a revised proposal for coverage for the April 25, 2005, to April 25, 2006, policy year. The proposal combined the boiler and machinery coverage with the commercial general liability coverage.
As a result of Hurricane Katrina, SJD’s property was damaged by wind. It said that the East/West Wines air-conditioning unit on the roof of the building was damaged by wind and required repair. As a result, East/West Wines lost its inventory and refused to pay rent. SJD submitted a claim to Travelers for loss of business income resulting from the loss of rental income. Travelers denied the claim.
SJD sued Marsh and Travelers in the U.S. District Court for the Eastern District of Louisiana, alleging that they negligently misrepresented that the policy covered business interruption losses and that the policy should be reformed to cover the business interruption losses sustained by SJD. Marsh moved for summary judgment.
Judge Ivan L.R. Lemelle granted Marsh’s motion for summary judgment, noting that courts in the Eastern District of Louisiana have held that policies containing “windstorm” exclusions exclude coverage for losses caused by hurricane wind damage. He said that even if the policy were reformed to reflect the previous policies’ coverages, the damage to the air-conditioning system would be excluded based on the windstorm exclusion.
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