The Length of the Road Back from Disaster: Four Rules for Measuring the Business Interruption Period
- ...that could be taken into account in fixing the BI period. A court will “allow for an extension of the theoretical replacement time for a reasonable period for any delay in the insured’s ability to reenter business that was due to the insurer’s unreasonable failure to timely perform its duties under the policy.” Id.
- In Hampton Foods, Inc. v. Aetna Casualty & Surety Co., 843 F.2d 1140, 1143-44 (8th Cir. 1988), a store was forced to evacuate due to imminent collapse caused by weather conditions. The BI period was held extended by the insurer’s refusal to pay. While the BI period is “theoretical,” it is extended where repair delay is due to the inaction of the insurer. The court also allowed coverage for interest on loans that had to be taken out during the BI period due to lack of insurer funding. Id.
- In Constitution State Ins. Co. v. Werner Enterprises, Inc., 1987 U.S. Dist. LEXIS 6023, at *4 (E.D.La. 1987), a restaurant was damaged as a result of flooding caused by a hurricane. Insurer delay in payment was held to extend the BI period.
- In United Land Investors, Inc. v. Northern Ins. Co., 476 So.2d 432, 438 (La. Ct. App. 1985), the BI period did not start until the date that insurer payments were made to allow for such repairs to proceed, even though the “due diligence” period could have been shorter. The BI period was specifically held to include “the time necessary for plaintiff to furnish adequate proofs of loss, submission of accurate estimates for repairs by building contractors and the time required for both parties to engage in negotiations over the amount to be paid.” Id.
- In Arnold v. Liberty Mut. Ins. Co., 469 So.2d 1155, 1159 (La. Ct. App. 1985), where a fire damaged a rental property, the BI period to recover for lost rents was extended due to insurer delay in securing an estimate and funding repairs.
- In Salamey v. Aetna Cas. & Sur. Co., 741 F.2d. 874, 877 (6th Cir. 1984), where a fire damaged the policyholder’s store, the BI period would have been two and a half months, but the insurer failed to pay for repairs. The insurer was held responsible for the additional BI loss caused by its failure to fund repairs.
- In Thico Plan, Inc. v. Ashkouti, 320 S.E.2d. 604, 609 (Ga. 1984), where a fire damaged apartments, insurer delay in funding allowed for the policyholder to collect lost rental income beyond the 120 days fixed by the policy.
“As the court wisely commented, the theoretical BI period ‘is the time it would take to replace the structure providing the building was put up by the experts in the court room. But buildings seldom are. In the field it snows, and men fall off girders, and the wrong size window glass is delivered.”
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