NYU suing FM Global unit for $1.5B for insurance coverage refusal in wake of Hurricane Sandy

NEW YORK University is suing a unit of FM Global for $1.47 billion in coverage, accusing the Johnston-based insurer of refusing to honor an insurance policy after Hurricane Sandy.
NEW YORK University is suing a unit of FM Global for $1.47 billion in coverage, accusing the Johnston-based insurer of refusing to honor an insurance policy after Hurricane Sandy.

JOHNSTON – New York University is suing a unit of FM Global for $1.47 billion in coverage, accusing the Johnston-based insurer of refusing to honor an insurance policy after Hurricane Sandy.
FM Global says the complaint is “without merit” and will “oppose it vigorously,” according to a spokesman.
The lawsuit, New York University v. Factory Mutual Insurance Co., was filed on Oct. 28 in New York Southern District Court. The university says it purchased an insurance policy from FM Global, worth $1.8 billion in coverage, but the insurer has refused to pay on a $1.4 billion claim, according to the suit.
The lawsuit focuses largely on property damages and financial losses stemming from business interruptions at the university’s medical facilities. But NYU estimates the Oct. 29, 2012 storm caused “catastrophic impacts” at more than 100 locations and although the school submitted a claim for $1.4 billion in 2013, FM Global didn’t pay, according to the suit. The lawsuit is for $785.6 million in damages and $681.2 million in lost business, according to the suit.
FM Global spokesman Montieth M. Illingworth says it is “regrettable that NYU has resorted to filing this lawsuit,” notwithstanding their best efforts to resolve their differences.
“FM Global has at all times honored our obligations under the policy provided to NYU,” he said. “We promptly paid $40 million to NYU within weeks of the Superstorm Sandy flood. The allegations in this complaint are without merit and we will oppose it vigorously.”
The disagreement lies in the policy language, which NYU says provided ‘all risk’ coverage, including $250 million sub-limit in flood coverage and $40 million “sub-sublimit,” for certain NYU properties, according to the complaint. But FM Global won’t pay because of “self-serving and overly broad interpretation,” of the definition of “flood,” according to the suit.
The Federal Emergency Management Agency awarded the school a $1.1 billion grant for repairs, but it says there are still parts of the NYU School of Medicine that are yet to reopen.
NYU claims the insurer subjected nearly all of its losses to the flood sublimit and criticized it, saying NYU suffered, “one of the worst years in its history,” while FM Global claimed one of its best years in 2012, “despite the impact of Superstorm Sandy.”
FM Global reported an increase of $1.1 billion in earnings from 2011 to 2013, which NYU says moved them from a $41.5 million net loss to a $1 billion net gain because it didn’t pay the claim.
“These financial successes were at the expense of NYU. FM did not pay NYU what it owed under the policy. Instead, FM used the amounts it wrongfully withheld from NYU to enhance its own performance,” according to the complaint.

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