U.S. judge deals Amtrak setback over Sandy storm losses

By Jonathan Stempel

NEW YORK, June 24 (Reuters) - Amtrak suffered a big setback in its attempt to recoup an estimated $1.1 billion of losses from Superstorm Sandy, when a federal judge on Wednesday rejected the railroad's efforts to recover much of that sum from its insurers.

U.S. District Judge Jed Rakoff in Manhattan agreed with Amtrak's insurers that Sandy was a single "occurrence" under the railroad's policies.

He also said the inundation of Amtrak property in the storm's aftermath was part of the railroad's "flood" damage rather than a separate loss.

Amtrak had argued that its insurers should pay up to its policy limits, with a maximum of $675 million per occurrence, but that most insurers wanted to cap any payout at $125 million.

It also said it had recouped a mere $30 million as recently as December, saying some insurers refused to pay anything unless it agreed to treat Sandy as a single insurable event.

Rakoff also found that policy provisions governing demolition and reconstruction did not cover bench walls and track beds that were not damaged by the storm. The judge said he would explain the reasons for his rulings "in due course."

Amtrak had sued at least 16 individual insurers or insurance groups such as Aspen Specialty Insurance, Commonwealth Insurance, American International Group (NYSE: AIG - news) 's Lexington Insurance, and Certain Underwriters at Lloyd's of London.

The complaint did not specify how much Amtrak thought it was owed, but that the amount would be proven at trial.

Christina Leeds, an Amtrak spokeswoman, said the railroad is "disappointed with the result given the clear language in our insurance policies. This case is still scheduled for trial July 14 for losses up to $125 million and Amtrak is focused on its trial preparations."

With winds extending more than 1,000 miles, Sandy made landfall in the mid-Atlantic states on Oct. 29, 2012, damaging or destroying more than 650,000 homes and causing in excess of $68 billion of damages.

New York and New Jersey bore much of the storm's impact, and service on Amtrak's busy Northeast Corridor was halted or disrupted for weeks afterward. Amtrak's formal name is National Railroad Passenger Corp.

The case is National Railroad Passenger Corp v. Arch Specialty Insurance Co et al, U.S. District Court, Southern District of New York, No. 14-07510.

(Reporting by Jonathan Stempel in New York; Additional reporting by Laila Kearney; Editing by Diane Craft)