An $11 million deductible just collapsed to $750,000, and the reason should make every property carrier re-read its windstorm clauses.
A federal appeals court has given a Florida railroad another shot at its Hurricane Irma claim, ruling on May 29, 2026 that its insurers botched the deductible math.
The story starts with a smart move. As Irma closed in on Florida in 2017, Florida East Coast Holdings Corporation pulled crossing gates from about 600 spots along its tracks and stored them, then reinstalled them once the storm cleared. The idea was to keep the aluminum gates from being ripped off and thrown into nearby structures or people. It worked. The gates came through fine and trains rolled again.
The precaution still cost money. With gates down, trains had to crawl or depend on workers posted at crossings, and the railroad lost revenue. An accounting firm, Pyxis Group, LLC, put the total losses at $5,605,881. Florida East Coast filed a claim. After a few years of back-and-forth, the insurers, led by Lexington Insurance Company, alongside Aspen Specialty, Houston Casualty, Allied World, Ironshore Specialty and others, denied it in December 2020, saying the loss came in under the deductible.
That is where the math turned odd. The policy carried a named windstorm deductible set at 5% of property values at locations damaged by the storm, with a $750,000 minimum. The district court read that as 5% of the value of all 600 gate systems the railroad protected, a figure it calculated at no less than roughly $10.95 million. Since that towered over the $5.6 million claim, the court said nothing was owed and handed the insurers summary judgment.
The Eleventh Circuit agreed on coverage but parted ways on the deductible. Both sides accepted that the policy's protection and preservation of property provisions applied, the clauses covering reasonable and necessary costs to temporarily protect or preserve insured property. The real fight was how much the railroad had to swallow first.
The answer came down to one word: damaged. The deductible is 5% of property values at locations damaged. But nothing was damaged, which was the entire point of pulling the gates. As the court noted, $750,000 is greater than 5% of zero. So, the minimum deductible won.
The court also turned down the railroad's push for broader coverage. Florida East Coast argued its expenses-to-reduce-loss clause, a sue-and-labor provision meant to reward an insured for limiting losses, should cover money spent to prevent loss. The court disagreed. To reduce a loss, it reasoned, there has to be an actual loss to shrink, and there wasn't one. It applied the same logic to the business interruption and consequential loss clauses, both of which require direct physical loss or damage caused by a peril. Since the railroad removed the gates itself and none were harmed, no peril caused a loss.
The takeaway for carriers is sharp. When a policy pegs a percentage deductible to locations damaged, a successful prevention effort can leave nothing to calculate against, and the floor deductible kicks in. The court sent the case back down to determine what Florida East Coast can recover under the $750,000 figure.
