Understanding Business Interruption Claims, Part 3
(Note: This Guest Blog is by Michelle Claverol, an attorney with Merlin Law Group in the Coral Gables, Florida, office. This is the third part in a series she is writing on business interruption claims).
In simple terms, business interruption insurance is intended to return to the insured's business the amount of profit it would have earned, had there been no interruption of the business or suspension of its operations as a result of a covered loss. However, as with all property insurance claims, causation is a crucial element of the claim and all coverage issues should be addressed at the outset.
In National Union Fire Insurance Company v. Texpak Group, N.V., 906 So.2d 300 (Fla. 3rd DCA 2005), the policyholder, a paper mill company, sued its property insurance carrier to recover more than eight million dollars in business interruption coverage. The loss occurred when a felt belt snapped in one of the machines, which destroyed the entire paper operation. The carrier alleged that the felt belt snapped as a result of the manufacturer’s faulty design. The policyholder prevailed in lower court, arguing that the “all-risk” policy had an “ensuing loss” exception that allowed recovery despite the faulty design exclusion. The carrier appealed.
The policy at issue in National Union read as follows:
Business Interruption
(1) Loss resulting from necessary interruption of business ... caused by loss ... covered herein ... to real and personal property ....
PERILS EXCLUDED
This policy does not insure:
* * *
D. against the cost of making good defective design or specifications.... however, this exclusion shall not apply to loss or damage resulting from such defective design or specifications....
The Third District Court of Appeals, following the Florida Supreme Court’s ruling in Swire Pac. Holdings, Inc., v. Zurich Ins. Co., 845 So.2d 161 (Fla. 2003), held that ensuing loss exception is not applicable if the ensuing loss is directly related to the original excluded risk. The Court further stated that holding otherwise would be to allow the ensuing loss provision to completely eviscerate and consume the design defect exclusion. It is important to note that it was proven at trial that the broken machine was poorly designed and that the felt-belt did not break accidentally.
If we are to learn something from this paper mill’s coverage nightmare, it is that in business interruption claims causation is crucial and that recovery will not possible if the business interruption damages do not directly flow from an underlying covered peril.
MY BUSINESS WAS BLOWN AWAY ACCORDING TO A EYEWITNESS IN HURRICANE IKE ON BOLIVAR PENINSULA. I RECEIVED THE STANDARD 11% ON THE STRUCTURE. I RECEIVED 0% OF MY BUSINESS INTERRUPTION. YOU DID READ RIGHT-0%. WILL I RECEIVE OVER AND ABOVE THE INSURED AMOUNT WHEN THE LAWSUIT CONCLUDES? AFTER I PAY THE ATTORNEYS? 16 MONTHS LATER, I REMAIN UNEMPLOYED. WHAT HOPE FOR THE FUTURE DO I HAVE? LOSS OF INCOME. THE INABILITY TO INVEST OR STARTUP ANOTHER BUSINESS. I REALLY FEEL SLIGHTED. WILL I EVER SEE AN EXTRA AMOUNT FOR THE STRESS, OR THE PAIN AND SUFFERING? WHAT HOPE DO I REALLY HAVE?
Dear Mr. McKnight: I read, w/great sadness, your comments above.
"..I REALLY FEEL SLIGHTED. WILL I EVER SEE AN EXTRA
AMOUNT FOR THE STRESS, OR THE PAIN AND SUFFERING?
WHAT HOPE DO I REALLY HAVE?"
Though I do not know you, I honestly "feel your pain!"
YOU SHOULD FEEL SLIGHTED as a result of your ins. co. not fully paying you and not treating you the way they're legally obligated to!
Sadly, morals have no place in this arena. While I (someone you've never met) "feel your pain," that huge, corporate conglomerate (a/k/a your ins. co.) has no feelings. I'm not an atty., ("just" a Legal Secretary in the world of ins. law - for the policholder!), however, I do not need to be an Attorney to tell you:
1. YES - THERE IS HOPE FOR YOU GETTING EVERY DIME - AND THEN SOME - FOR DAMAGES COVERED UNDER YOUR POLICY!
2. THE "HOPE" THAT YOU HAVE ARE THESE MARVELOUS LAWS CONTAINED IN FLORIDA STATUTES DEALING WITH "BAD FAITH." BAD FAITH IS A LOT OF THINGS (TOO MUCH TO ADDRESS IN THE COMMENT SPACE PROVIDED) BUT, IN A NUTSHELL, IT'S A SEPARATE CAUSE OF ACTION (APART FROM YOUR INITIAL CLAIM AND/OR LAWSUIT AGAINST YOUR
INS. CO. FOR BENEFITS ARISING FROM WHATEVER TYPE OF LOSS YOU'RE MAKING CLAIM FOR (i.e., damages from
Hurricane Ike)...wait a minute though........
I JUST RE-READ YOUR ENTRY AND SEE THAT YOU SAID YOU
HAVE ALREADY BEEN (AND MAY STILL BE?) IN
LITIGATION, BUT THAT (THUS FAR)YOU'VE:
"....RECEIVED THE STANDARD 11% ON THE STRUCTURE.
I RECEIVED 0% OF MY BUSINESS INTERRUPTION. YOU
DID READ RIGHT-0%. WILL I RECEIVE OVER AND ABOVE
THE INSURED AMOUNT WHEN THE LAWSUIT CONCLUDES?
AFTER I PAY THE ATTORNEYS? 16 MONTHS LATER, I
REMAIN UNEMPLOYED..."
0% OF YOUR BUS. INTERRUPTION? WHY? COULD YOU NOT PROVE YOUR LOSS(ES)/DAMAGES TO YOUR INS. CO. BY WAY OF SUPPORTING DOCUMENTATION AND EXPERT OPINION(S)? I DOUBT IT. YOU SOUND LIKE THE TYPE OF MAN THAT PROBABLY HAD ALL OF YOUR LOSSES DOCUMENTED, SUPPORTED AND THEN SOME...AM I RIGHT?
GEEZ, I GOTTA SAY THAT I HOPE THIS 0% BUS. INT. PYMT. DECISION BY YOUR INS. CO. WAS RENDERED PRIOR TO YOU RETAINING COUNSEL AND THAT IT DID NOT OCCUR WHILE YOU ARE BEING REPRESENTED!! IF IT DID HAPPEN THAT WAY WHILE YOU ARE REPRESENTED BY COUNSEL AND, IF YOU ARE, INDEED, STILL IN THE MIDST OF LITIGATION, YOU MAY WANT TO SEEK ANOTHER LEGAL OPINION. YOU SEE, ATTORNEYS GET CASE AFTER CASE AFTER CASE...BUT YOU, AS A BUSINESSMAN AND PROVIDER, ONLY GET THIS ONE CHANCE AT THIS ONE PARTICULAR BUSINESS, AT THIS ONE PARTICULAR LOCATION, ETC., FOR WHICH YOU'RE MAKING A CLAIM FOR/ON.
AS FAR AS YOUR QUESTION/STATEMENT:
"...I REALLY FEEL SLIGHTED. WILL I EVER SEE AN
EXTRA AMOUNT FOR THE STRESS, OR THE PAIN AND
SUFFERING? WHAT HOPE DO I REALLY HAVE?"
NOW I'M CURIOUS TO KNOW IF YOU FEEL SLIGHTED BY YOUR INS. CO. AND/OR THE ATTY. (OR LAW FIRM) REPRESENTING (OR WHO REPRESENTED YOU) IN THE LITIGATION AND/OR THE PENDING LITIGATION?
BOTTOM LINE AND, AGAIN I'M NOT AN ATTORNEY, BUT I'M PRETTY WELL VERSED IN THIS AREA AND I'M NOT GIVING YOU LEGAL ADVICE, I'M SPEAKING FROM PAST EXPERIENCE AND MY HEART.
FURTHER, I'M TELLING YOU WHAT I KNOW THAT OCCURS IN FLA. BECAUSE I'M A TAMPA NATIVE AND I'VE NEVER WORKED OUTSIDE OF FLA. - BUT I DO KNOW THAT MOST STATES HAVE "BAD FAITH" LAWS PROTECTING POLICYHOLDERS...again, you just have to have the "right team" behind you - no matter what state you're in!
Will you see monies for the stress, pain and suffering, mental anguish, lost business, lost $, lost profits, etc., endured and incurred as a result of "wrongful claims handling/conduct" by your ins. co. which, apparently, had (among other things) an "eye toward its profits growing" (from your premium $) instead of following the law and adhering to its obligation(s) of "good faith and fair dealing" and rightfully taking care of you - THE INSURED? THE ANSWER IS A RESOUNDING "YES!!!" THIS WILL ONLY HAPPEN THOUGH IF YOU HAVE THE RIGHT PEOPLE REPRESENTING YOU & YOUR INTERESTS, REPRESENTING YOUR BUSINESS & YOUR BUSINESSE'S INTERESTS, INDEED - ALL OF YOUR INTERESTS(!), ETC.
THINGS START "HAPPENING" WHEN YOUR INS. CO. IS PUT "ON NOTICE" REGARDING THEIR "BAD FAITH" ACTIONS. IT IS AT THIS POINT THAT THEY REALIZE THAT YOU NOW HAVE THE "RIGHT, COMPETENT TEAM" IN YOUR CORNER. THIS, OBVIOUSLY, INTERFERES WITH THEIR ABILITY TO KEEP YOUR PREMIUM $, TO NOT PAY YOUR CLAIM(S) AND IS NOT IN ACCORD W/THEIR PROFIT SCENARIO (WHICH IS, OBVIOUSLY, TO TAKE IN PREMIUM DOLLARS - NOT PAY THEM OUT!).
Then, if the "bad faith notice" negotiations do not work and you do not get paid the benefits rightfully due you, a
BAD FAITH LAWSUIT IS GENERALLY FILED. A BAD FAITH LAWSUIT IS SEPARATE AND APART FROM THE LAWSUIT YOU'RE PROBABLY INVOLVED IN NOW (I, of course, don't know though - but I'm assuming - judging from the questions you've asked - that you ARE NOT familiar with "bad faith" and probably are not involved in a bad faith lawsuit).
Please remember that it is imperative that you retain and have the right people (i.e., "team") representing you and your interests - ALL OF THEM! I CAN TELL YOU THAT THERE ARE LAWS THAT PROTECT YOU (AND YOUR BUSINESS) IN THIS REGARD AND THAT....
.... THERE IS HOPE!!
.....DON'T LOSE HOPE!!
Please, please get the COMPETENT AND RIGHT HELP THAT YOU NEED (AND DESERVE)!
To be honest, you made the RIGHT CHOICE (and asked germaine questions and have extremely legitimate concerns)by visiting this website and posting your comment.
I WISH YOU THE BEST OF LUCK AND HOPE YOU GET ALL THAT IS RIGHTFULLY DUE YOU WHICH, AGAIN, YOU HAVE A MUCH BETTER CHANCE OF RECEIVING WHAT'S "YOURS" WITH THE "RIGHT TEAM" BEHIND YOU!!!
SHIRLEY HEFLIN
P.S. MERLIN LAW GROUP: IF MR. McKNIGHT WANTS MY E-MAIL ADDRESS TO WRITE ME DIRECTLY, I DO NOT MIND YOU GIVING IT TO HIM. THANK YOU.