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Delaware court bars insurers from reclaiming $50 million Sandy settlement
The ruling said the policies were silent on recouping settlement payments and that the insured, Turner, never agreed to any clawback.
A Delaware court ruled on August 3, 2026 that two insurers could not reclaim $50 million they paid to settle a Superstorm Sandy-related claim, concluding that reservation of rights language and insurer intent were not enough without a policy clause or the insured's agreement.
Insurance Business reports the insurers, Lexington Insurance Company and National Union Fire Insurance Company of Pittsburgh, each contributed $25 million to fund a settlement for Turner, after paying under a reservation of rights. The court applied New York law and predicted the state’s highest court would not allow recoupment of settlement payments unless the policy spells out that right or the insured agrees, finding both conditions were missing.
The dispute traces back to October 2012 flooding allegations at New York University’s Langone Medical Center campus, where NYU sued Turner Construction over a ventilation shaft opening it said was improperly covered as Sandy approached. NYU first sought more than $1 billion and later amended its claim to allege damages topping $2.2 billion, and at a January 2022 mediation NYU asked insurers for full tower limits of roughly $516 million.
The insurers agreed to fund a settlement on October 7, 2022 while reserving their rights to seek recoupment of policy limits, but Turner took the money without agreeing to a clawback. The court granted Turner summary judgment and dismissed the insurers’ recoupment and unjust-enrichment counterclaims, and it rejected Turner’s own breach-of-contract claim, while allowing Turner’s bad-faith claim about alleged stalling to move to further discovery.