The Length of the Road Back from Disaster: Four Rules for Measuring the Business Interruption Period



...because repairs are not yet complete. Id. at *22. The court declined to adopt actual repair time as the measure, but noted that if and when repairs are, in fact, completed, that time should become the “analytical starting point” for the adjustment. The court likewise harmonized its ruling with Alevy and other cases:

[T]he use of a non-theoretical measure in many of the cases cited by the Silverstein Parties was shaped by the posture in which such cases were presented to the courts — namely, the stage of rebuilding then completed. In Alevy, for example, the insured party had already rebuilt its property by the time the Ninth Circuit addressed how the restoration period was to be measured. It thus made perfect sense under such circumstances, as the Court concluded, to utilize the actual rebuilding period as an analytic ‘starting point’ for determining the period of restoration . … Here, by contrast, the Silverstein Parties have not yet rebuilt the WTC properties. … Id. at *22-23 (emphasis added). 3

Nearly every case addressing this issue can be understood in this simple fashion — if there are not actual repairs, the court resorts to the theoretical approach; if there are actual repairs, the court adopts the actual time period as the presumptive starting point. From there, the insurer can attempt to prove that the policyholder unfairly delayed and added to the BI period. Rules three and four, however, are critical to the analysis.

Rule Three: When the Insurer Causes the Delay

Where delay is caused not by the policyholder, but by the insurer, the BI period includes such delay. For example, the insurer might hold up repairs because it is taking extra time to issue approvals for certain work or contractors, or the insurer’s adjuster is failing to be attentive to the claim. Commonly, repairs are held up because the insurer has failed to provide sufficient advances to pay for them, and the policyholder does not happen to have surplus cash to front the repair costs. The main ingredient for any repair job is...

“If the insurer fails to do its part promptly in adjusting the claim and providing advances for repairs, the policy, the case law, and fairness dictate that the insurer’s delay must be taken into account in setting the BI period.”