Los Angeles Business Insurance Claims Appeals Attorney
About business-interruption insurance
Businesses often purchase special coverage to protect their income stream after a loss, called business-interruption insurance. For example, in a case we recently handled, Amerigraphics, Inc. v. Mercury Ins. Co. (2010) 182 Cal.App.4th 1583, the insurer had issued a “Special Multi-Peril Policy” that covered damage to business personal property, which includes property used in the business and tenant improvements, and loss of business income due to business suspension.
The business-interruption coverage, titled “Business Income,” provided: “We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your `operations’ during the `period of restoration.’ . . . [¶] . . . [¶] We will only pay for loss of Business Income that you sustain during the `period of restoration’ and that occurs within 12 consecutive months after the date of direct physical loss or damage. . . . [¶] Business Income means the: [¶] (i) Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred if no physical loss or damage had occurred . . .; and [¶] (ii) Continuing normal operating expenses incurred, including payroll.”
After Amerigraphics’ business premises was damaged in flood, requiring it to relocate, its business income plummeted. The insurer, however, argued that there was no coverage for business interruption because the company had been running at a loss the year before the loss. We convinced that court that the insurer’s construction of the policy was erroneous, and was made in bad faith.
Mr. Ehrlich also handled a business-interruption case for a cruise line that operated a tour business in Alaska, which suffered business-interruption damages in excess of $1 million as a result of the two-day “groundstop” order that cancelled all airline traffic in the U.S. after the September 11, 2001 attacks. The policy provided coverage for “prevention of access” to the insured’s property. Mr. Ehrlich defeated the insurer’s motion for summary judgment in federal court, and the case settled shortly afterward.
Mercury Insurance Co. took over two years to process and pay the straightforward business-loss case of Amerigraphics Company, a commercial printer in the San Fernando Valley, whose premises were flooded when a pipe broke in the building they leased. A jury found that Mercury acted in bad faith and awarded punitive damages. The Court of Appeal affirmed, holding that the company’s business-interruption coverage applied to the business’s fixed costs, even if the business was not making a profit, and finding that Mercury’s conduct was tortious and warranted an award of punitive damages. (Amerigraphics v. Mercury Ins. Co. (2010) 182 Cal.App.4th 1538.)