The Effect of the Sale of a Commercial Property on a Pending Insurance Claim
A D J U S T I N G T O D A Y even in circumstances where there is no actual business interruption. 9 So even if a property is not rebuilt and there is never any actual BI period, the policyholder remains entitled to what the BI loss would have been for the projected “theo- retical” period of interruption. Insurers frequently cite this line of cases to support reducing a BI period by arguing that the poli- cyholder failed to repair with “all due diligence and dispatch.” They assert that the BI period is an ab- stract time period that floats free from what actually happens. In- deed, a federal court in Manhattan recently agreed with this concept in allowing the insurers to define the BI period for the World Trade Center complex as the theoretical time period it “should” take to rebuild the complex. 10 This same line of cases applies in the instance of a sale and should prevent a reduction in the “theoretical” BI period that defines the scope of the seller’s BI recovery. If insurers are consistent with their principles, they cannot have it both ways—they cannot assert the “the- oretical” BI period when it is short- er than the actual period (e.g., due to repair delays), but then ignore the “theoretical” BI period when it happens to be longer than the ac- tual period (e.g., due to a sale). BA Properties is the only case to ad- dress directly and fully the issue of whether a seller/policyholder’s BI claim survives the sale of a proper- ty, in the absence of an assignment. There are a few off-point cases in the assignment context that insur- ers sometimes cite, which address the very different issue of whether a purchaser who has been assigned a claim can assert its own BI loss. For example, in Bronx Entertain- ment, LLC v. St. Paul’s Mercury Ins. Co ., the insured, Family Golf, expe- rienced losses from severe weather and filed an insurance claim. Fam- ily Golf thereafter sold its assets to Bronx Entertainment, and specifi- cally assigned its insurance claim. 11 The court correctly noted that the assignee received only those insur- ance rights that belonged to the The new owner, Bronx Entertainment, attempted to assert not only the pre-sale BI losses of Family Golf, but its own post-sale BI losses. The court ruled that Bronx Entertainment could not assert its own BI losses. 10 SR International Business Ins. Co. Ltd.V. World Trade Center Properties et al. , 2005 U.S. Dist. Lexis 13001 (S.D.N.Y. 2005). 11 Bronx Entertainment, LLC v. St. Paul’s Mercury Ins. Co. , 265 F.Supp.2d 359 (S.D.N.Y. 2003) (“ Bronx Entertainment ”). 12 Bronx Entertainment , 265 F.Supp.2d at 361. 13 Bronx Entertainment , 265 F.Supp.2d at 361.
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