Despite 'named storm' coverage for Skanska unit, Harvey flooding not included

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Interstate highway 45 is submerged from the effects of Hurricane Harvey seen during widespread flooding in Houston, Texas, U.S. August 27, 2017. REUTERS/Richard Carson
  • Reverses lower-court ruling that ‘windstorm’ automatically included flooding
  • Broad reading was inconsistent with text of Landmark American’s policy

(Reuters) - Landmark American Insurance Co does not owe a Skanska USA unit $1.5 million for flooding damage from Hurricane Harvey because the policy it issued covered only wind and hail damage, a federal appeals court held Thursday.

The 5th U.S. Circuit Court of Appeals reversed a lower-court judge’s ruling for SCD Memorial Place II, owner of a Skanska-developed office building in Houston that was flooded when the nearby Buffalo Bayou overflowed during the August 2017 storm.

Attorneys for Landmark and SCD did not immediately respond to requests for comment on Thursday.

According to the 5th Circuit, SCD has already recovered “millions of dollars” under its primary, all-risk policy from Lexington Insurance, which included flooding in its definition of windstorm damage.

However, Lexington’s policy had a very high deductible, so SCD also purchased a “deductible buy-back” policy from Landmark.

Landmark’s policy promised reimbursement for up to $1.5 million in deductibles for damage from two “Perils Covered: Windstorm or Hail associated with a Named Storm.”

Since Landmark’s policy did not define “Windstorm,” SCD argued that it should borrow the expansive definition from Lexington's policy. The district court judge in Houston agreed.

Reversing, the 5th Circuit said Lexington’s definition made no sense for Landmark’s named-risk policy, which “sets up ‘Windstorm’ and ‘Hail’ as specific perils.”

Since SCD had not claimed any wind or hail damage, “the Landmark policy does not apply to the type of damage that the SCD property sustained in connection with Hurricane Harvey,” the panel concluded.

The case is Landmark American Insurance Co. v. SCD Memorial Place II LLC, 5th U.S. Circuit Court of Appeals No. 20-20389.

For Landmark: Jay Brown and Hilary Channing Borow of Shackelford, Bowen, McKinley & Norton

For SCD Memorial Place II: Mark Miller and Tae Andrews of Miller Friel

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