Jury’s Findings Interpreting Insurance Contract Affirmed
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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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Chutzpah: After Criminal Prosecution Defendant Sues USA
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Dr. Segun Patrick Adeoye, a medical doctor, filed a lawsuit against the United States of America, seeking damages for alleged violations during his criminal prosecution. He was acquitted by a jury but claims to have suffered significant harm, including financial losses, damage to his professional reputation, and personal distress.
In Dr. Segun Patrick Adeoye v. The United States Of America, Civil Action No. 4:25-cv-83, United States District Court, E.D. Texas, Sherman Division (July 23, 2025) the USDC dismissed Adeoye’s suit.
FACTUAL BACKGROUND
Dr. Adeoye was indicted on charges of conspiracy to commit wire fraud and money laundering. The indictment alleged that he and his co-conspirators obtained at least seventeen million dollars through various fraudulent schemes. Despite being acquitted, Dr. Adeoye claims that his ...
Payment of Appraisal Award Defeats Claim of Bad Faith
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Hurricane Damage to Dwelling Established by Appraisal Award
In Homeowners Of America Insurance Company v. Emilio Menchaca, No. 01-23-00633-CV, Court of Appeals of Texas, First District (July 31, 2025) after a hurricane Homeowners of America Insurance Company (“HAIC”) estimated that the cost of covered repair to Menchaca’s house was $3,688.54, which was less than his deductible, and therefore no payment would be made.
FACTS
After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).
On August 23, 2018, Menchaca’s counsel ...
Payment of Appraisal Award Defeats Claim of Bad Faith
Post 5163
Read the full article at https://lnkd.in/dNpKKcYx, see the full video at https://lnkd.in/dNgwRP8q and at https://lnkd.in/dA9dvd-D, and at https://zalma.com/blog plus more than 5150 posts.
Hurricane Damage to Dwelling Established by Appraisal Award
In Homeowners Of America Insurance Company v. Emilio Menchaca, No. 01-23-00633-CV, Court of Appeals of Texas, First District (July 31, 2025) after a hurricane Homeowners of America Insurance Company (“HAIC”) estimated that the cost of covered repair to Menchaca’s house was $3,688.54, which was less than his deductible, and therefore no payment would be made.
FACTS
After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).
On August 23, 2018, Menchaca’s counsel ...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
