Hunton Insurance Recovery Blog

A federal appeals court reversed an auto parts manufacturer’s summary judgment win, construing a policy limitation on flood hazards to apply broadly to all types of losses, even though the limit “does not expressly say what losses it limits.” In Federal-Mogul LLC v. Insurance Company of the State of Pennsylvania, manufacturer Federal-Mogul suffered more than $60 million in property and time-element losses following a 2011 flood in one of its factories in Thailand. Federal-Mogul submitted a claim to its insurer, but the insurer refused to pay more than $30 million because the flood occurred in a high hazard flood zone, to which the insurer argued a sublimit in the policy applied.

A recent decision highlights the need for businesses to carefully consider the applicability of insurance coverage across borders. In this case, the owners of an Idaho restaurant traveled to Thailand for business related to the restaurant. While in Thailand, thieves stole uniforms and decorations from the owners, who then submitted an insurance claim. The insurer denied the claim because the policy only covered property within the "coverage territory," which was limited to the U.S., its territories, and Canada.