(Article from Insurance Law Alert, April 2019)
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A New Jersey appellate court ruled that a restaurant that was closed for several weeks following Superstorm Sandy was not entitled to coverage under a “civil authority” provision. Maritime Park, LLC v. Nova Cas. Co., 2019 WL 1422918 (N.J. Super. Ct. App. Div. Mar. 29, 2019).
Maritime Park, the owner of a restaurant located in a municipal park on the New Jersey waterfront, was forced to close operations for several weeks following Superstorm Sandy. The New Jersey Department of Environmental Protection issued an order closing the park prior to landfall of the storm. The restaurant remained closed for several weeks and thereafter operated on a curtailed schedule. During the relevant time frame, Maritime Park was insured by Nova Casualty, which paid approximately $82,000 under a utility services provision based on the restaurant’s power outage. Maritime Park sought additional coverage under a civil authority provision, which the insurer denied. A New Jersey trial court granted Nova Casualty’s summary judgment motion, and the appellate court affirmed.
The civil authority provision states: “When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises.” The appellate court explained that this language requires the prohibition on access to the property to be the result of damage caused by a “covered cause of loss.” The policy expressly excluded water as a covered cause of loss, including damage caused by water in combination with wind, storm surge or other perils. The court therefore held that even if the state agency’s closure order caused Maritime Park to lose business revenue, the civil authority provision was inapplicable because the circumstances did not involve a “covered cause of loss.” In so ruling, the court noted that “[i]t is inconsequential that Maritime’s property itself was not damaged by flooding. Due to the anti-concurrent cause provision, the Civil Authority language affords no coverage where the restrictions on Park access were produced, at least in part, by flooding.”