Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by . . . [the] rising, overflowing[,] or breaking of any boundary, of any . . . body of water . . ., whether driven by wind or not” (the “Flood Exclusion”). In particular, Great Northern relied on a portion of the Flood Exclusion, commonly known in the insurance industry as an anti-concurrent causation (“ACC”) clause, which bars coverage for losses stemming from multiple contributing causes provided that the insurer can demonstrate at least one of those causes is excluded under the Policy. Great Northern’s policy stated the Flood Exclusion applies “regardless of any other cause or event that directly or indirectly . . . contributes . . . to[] the loss or damage”.
According to Great Northern, Madelaine Chocolate’s damage was caused, at least in part, by wind-driven flooding and was thus excluded under the ACC clause of the Flood Exclusion.
Following Great Northern’s denial of coverage, Madelaine Chocolate sued for breach of contract.
After a week-long trial, the jury returned a verdict in favor of Great Northern. New York law imposes a heavy burden on the insurer, who must prove that “its interpretation [of the exclusion] is correct” to avoid application of “the rule of contra proferentem, which generally provides that . . . any ambiguity in the policy should be resolved in favor of the insured.”
Insurance Policy Interpretation:
This case highlights the complexities involved in interpreting insurance policies, especially when multiple clauses and endorsements are present. The ambiguity created by the Windstorm Endorsement’s ACC clause vis-à-vis the Flood Exclusion demonstrates the challenges insurers and insureds face in determining coverage.
Burden of Proof:
The case underscores the heavy burden placed on insurers to prove their interpretation of policy exclusions. Great Northern had to demonstrate that its construction of the policy was the only reasonable interpretation to avoid coverage for storm-surge losses.
Extrinsic Evidence:
The court’s consideration of extrinsic evidence, including the parties’ subjective intent and objective conduct, emphasized the importance of such evidence in resolving ambiguities in insurance contracts.
Jury’s Role:
The case illustrates the significant role juries play in interpreting ambiguous contracts and assessing the intent of the parties. The jury’s verdict in favor of Great Northern, despite the ambiguity, showed the weight given to the evidence presented during the trial.
Policyholder Awareness:
For policyholders, this case serves as a reminder to thoroughly understand their insurance policies and the implications of any exclusions or endorsements. It highlights the importance of clear communication with insurers about coverage expectations and clear communications from the insurer about the coverages provided.
ZALMA OPINION
It is often claimed by pundits that interpretation of insurance contracts is too complex for juries to resolve and should be limited to the wisdom of a District Court Judge. This case makes clear that juries are capable of interpreting an insurance contract’s terms and apply evidence presented at trial to understand the alleged ambiguity in an insurance contract. Judges are no more human than a jury of the peers of the parties to the insurance contract.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Post 5185
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Post 5185
Posted on September 8, 2025 by Barry Zalma
See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q
This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.
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See the full video at and at
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© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
