A Delaware court ruled on August 3, 2026 that two insurers couldn't reclaim $50 million they paid to settle a Hurricane Sandy claim.
The message to carriers was simple: if you want to recover settlement money later, write it into the policy. Lexington Insurance Company and National Union Fire Insurance Company of Pittsburgh, Pa. had each put in $25 million to settle a lawsuit against their insured, Turner. They paid under a reservation of rights - a notice that they meant to seek the money back - but the policies said nothing about that right.
The dispute grew out of Superstorm Sandy. New York University sued Turner Construction over flooding at its Langone Medical Center campus, saying the builder failed to properly cover a large opening around a ventilation shaft as the storm neared in October 2012. NYU said that failure let "millions of gallons of water" in, spreading through underground tunnels. It first sought more than $1 billion, then amended its claim to allege damages topping $2.2 billion.
At a January 2022 mediation, NYU asked all the insurers for their full tower limits - roughly $516 million. On October 7, 2022, the insurers agreed to fund a settlement, but reserved their rights, writing that "AIG reserves its rights to seek and fully intends to seek full recoupment of the limits of the Policies." Turner took the money but refused to agree to any clawback. The deal closed on January 11, 2023.
Applying New York law, the court predicted the state's highest court would not allow an insurer to recoup settlement payments unless the policy spells out that right or the insured agrees. Here, the policies were silent and Turner never agreed. The court pointed out that the policies did allow recoupment for motorist coverage - proof the insurers knew how to write the clause when they wanted it.
The court granted Turner summary judgment in full, and the insurers' recoupment and unjust-enrichment counterclaims were dismissed. It also rejected Turner's own breach-of-contract claim, since Turner couldn't point to any policy provision the insurers had broken.
The insurers still face one open front. Turner's claim that they acted in bad faith - allegedly stalling payment despite knowing they owed it - survived and heads to further discovery.
