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Insurer’s Denial of Mitigation Claim for Extra Costs to Prevent Cancellation of Contract Upheld

Many property insurance policies that provide coverage for business interruption losses also include “extra expense” coverage for reasonable and necessary extra costs to temporarily continue as nearly as possible normal business operations, or to reduce the period of time necessary to resume normal business operations. Some policies also include provisions, sometimes referred to as mitigation provisions, which afford coverage for additional costs incurred by an insured to reduce its business income losses in the event its business operations are disrupted because of a covered loss. The differences between the two coverages, and how they might apply in the event of an otherwise covered business interruption loss, will depend on the wording of the provisions and the facts of the claim.

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Posted in Extra Expense

Eighth Circuit: Repairs May Be Compensable as Extra Expense Even if They Don’t Reduce the Business Income Loss

“Read the policy, read the policy, read the policy” is a famous piece of advice for coverage counsel everywhere.  Last Friday in Midwest Reg’l Allergy, Asthma, Arthritis & Osteoporosis Center v. Cincinnati Ins. Co., 2015 WL 4590642, 2015 U.S. App. LEXIS 13430 (8th Cir., Jul. 31, 2015), a unanimous panel of the Court of Appeals rejected arguments that a contract of insurance required that any Extra Expense serve to reduce the otherwise payable business income loss in order to be compensable.  As interpreted by the court, the policy was written in such a fashion as to make that a prerequisite for only one of the three defined types of Extra Expense. The insured operated a clinic in Joplin, Missouri.  On

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Posted in Extra Expense, Tornado

California Court: An Insurance Claim for Feng Shui Is Not Harmonious Qi

Feng shui is a Chinese philosophical system that supposedly orients buildings and their contents in an auspicious manner.  Last month in Patel v. American Economy Ins. Co., — F.Supp.2d —, 2014 WL 1862211 (N.D. Cal., May 8, 2014), however, a California court rejected the notion that it was compensable under a first-party property insurance policy as either a legitimate expense to repair direct physical loss or damage or a necessary extra expense to avoid additional business income loss. On October 14, 2009, a fire filled the dental offices of Dr. Namrata Patel with smoke.  Dental and electronic equipment was damaged, and she incurred costs for cleaning and repair, inventory replacement, and lost business income during a one-month closure after the

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Posted in Direct Physical Loss or Damage, Extra Expense, Fire
About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
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