Insurance coverage is tricky. And there are devils with sharpened pitchforks lurking in the details. The Albany, N.Y., Ramada Plaza is the latest hotel to learn this lesson.
Hurricane Irene hit Albany in August of 2011. It produced heavy rain and strong winds that herded water into the hotel’s interior. Picture a mess and extensive damage.
The hotel had an all-risk commercial liability insurance policy issued by Selective Insurance Company of America. Like many such policies, it covered all physical loss and damage except for losses caused by stated exclusions.
Following the hurricane, the hotel filed an insurance claim. Looks like an open-and-shut case. But... this is where those guys in red hang out. The insurance company declined to pay based on an exclusion from coverage for wear and tear.
The hotel sued for breach of contract and Selective sought dismissal of the lawsuit. It asserted the damage was not caused by the hurricane, but rather by the hotel’s lax caulking maintenance. Turns out caulk originally had been installed on the hotel’s exterior walls to seal the areas where the walls met the hotel’s concrete floors and windows abutted surrounding masonry walls. Per the insurance company’s engineer, the caulk had separated from these surfaces due to age and lack of maintenance, creating spaces through which storm water traveled into and through the walls. Bolstering this argument was testimony by both the hotel’s owner and general managers that the exterior caulk had not been checked as part of any regular maintenance program and had never been addressed, to their recollection. Yikes!
In response, the hotel provided the opinion of a supposed expert that the storm winds forced the windows to bow, creating temporary and permanent openings through which the rain entered. But the inn’s witness was no match for Selective’s engineer. The former’s experience consisted of sales and management responsibilities for construction companies, not experience relating to the causes of window failure during high winds or storms. He has a bachelor’s degree in accounting, no engineering training and no specific knowledge or education in identifying causes of window failure.
Given this line-up, the court ruled for the insurance company and dismissed the case.
The lessons are several. Ensure that your building maintenance plan is sufficiently thorough in scope and frequency. Periodically review your insurance coverage with a knowledgeable insurance professional and/or attorney to confirm adequate coverage. When hiring an expert for court, seek top-notch credentials, expense notwithstanding.
Karen Morris is a lawyer, municipal judge and distinguished professor at Monroe Community College in Rochester, N.Y., where she teaches hospitality law. Contact her at [email protected].