HOUSTON - The 14th Court of Appeals concluded today that a policy’s flood endorsement does not control the amount of coverage available for a nursing facility’s business losses resulting from Hurricane Harvey flooding.
The 14th Court’s opinion stems from a dispute over insurance coverage between Seven Acres Jewish Care Services and The Hanover Casualty Company.
As a result of Hurricane Harvey, Seven Acres sustained extensive physical damage and loss after its first floor was flooded. The nursing facility’s policy contained a special endorsement providing a limit of $4.5 million in coverage for the peril of flood, the opinion states.
Seven Acres made a claim on the policy for losses due to building damage as well as business-income losses. Hanover paid Seven Acres the entire $4.5 million limit applicable to the flood endorsement in the policy but refused to make any payments beyond the flood limit, explaining that all claims arising from the flood—whether claims for property damage or business-income losses and extra expense—were subject to the flood limit, the opinion states.
Seven Acres disagreed on the basis that its business-income losses claim was subject to a separate policy limit. In January 2020, Seven Acres filed suit against Hanover, seeking payment for its business-income and extra-expense claim pursuant to the policy.
Court records show Seven Acres filed a partial traditional summary-judgment motion seeking judgment as a matter of law that the policy’s flood limit does not control the amount of coverage available for its business income losses. The trial court granted the motion in October 2020.
On appeal, Hanover asked the 14th Court to resolve the following controlling question of law: Does Hanover policy’s flood endorsement and flood limit control the amount of coverage available for Seven Acres’ claimed business income and/or extra expense losses resulting from Hurricane Harvey flooding?
The 14th Court affirmed the interlocutory order of the trial court.
Justices found that the the language of the flood endorsement does not support Hanover’s interpretation to strictly subordinate all flood-related losses and claims to the flood limit, concluding Hanover’s interpretation is not reasonable.
Case No. 14-20-00736-CV