A D J U S T I N G T O D A Y Gary Thompson is a partner with the law firm of Reed Smith LLP in Washington, D.C. He represents policyholders in their pursuit of property and business interruption insurance proceeds. The views expressed herein do not necessarily reflect those of the firm, its attorneys, or its clients, or with regard to any pending cases. The author thanks Michael Raibman for his review. Gary Thompson Adjusting Today on the Web — www.AdjustingToday.com View our entire catalog of back issues; download PDF versions, subscribe and contact the editor CORPORATE OFF ICE 126 Business Park Drive Utica, New York 13502 800.382.2468 Outside U.S. (315) 797.3035 FAX: (315) 272.2054 Editor@AdjustingToday.com WEB ADDRESSES www.AdjustersInternational.com www.AdjustingToday.com PUBL ISHER Ronald A. Cuccaro, SPPA EDI TOR Sheila E. Salvatore ADJUSTING TODAY is published as a public service by Adjusters International, Inc. It is provided for general information and is not intended to replace professional insurance, legal or financial advice for specific cases. AT13 3029-1R Copyright © 2013 Adjusters International, Inc. Adjusters International ® and the AI logo are registered trademarks of Adjusters International, Inc. Follow Adjusting Today on Facebook & Twitter: Facebook.com/AdjustersInternational Twitter.com/AdjustingToday ____________________ 1 Similarly, in Grand Pacific Hotel Co. v. Michigan Commercial Ins. Co., 90 N.E. 244 (Ill. 1909), a theoretical BI period was used where the policyholder’s hotel was destroyed by fire and it relocated elsewhere. And in Hawkinson Tread Tire Service Co. v. Indiana Lumbermans Mutual Ins. Co., 245 S.W.2d 24 (Mo. 1951), the “probable experience” at the location destroyed by fire was used where the policyholder relocated. 2 There are a few off-point cases in the assignment context that insurers sometimes cite addressing the very different issue of whether a purchaser who has been assigned a claim can thereby assert its own BI loss. For example, in Bronx Entertainment, LLC v. St. Paul’s Mercury Ins. Co., 265 F.Supp.2d 359 (S.D.N.Y. 2003), the policyholder experienced losses and thereafter sold its assets and assigned its insurance claim. The court correctly noted that the assignee received only those insurance rights that belonged to the assignor, and no more. The assignee, thus, could not assert its own post-sale BI losses. 3 Similarly, in Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.2d 384 (2d Cir. 2005), the policyholder had not and would not rebuild its drug store destroyed in the lower level of the World Trade Center. As a result, the court employed a “hypothetical” approach to determining the BI period (and not tied to the WTC site). Had actual repairs been completed, the actual period would have been the presumptive measure. 4 Some courts have held the opposite, that even an insurer’s non-payment of a claim does not act to toll or delay a purely theoretical BI period (poorly reasoned, in this author’s opinion). See, e.g., Breton LLC v. Graphic Arts Mut. Ins. Co., 2010 WL 678128 (E.D.Va. Feb. 24, 2010); B.S.S.B., Inc. v. Owners Ins. Co., 2010 WL 320229 (M.D.Ga. Jan. 20, 2010). In other cases, however, courts have identified additional BI loss caused by insurer delay in payment or adjustment as a “consequential damage.” See, e.g., 30-40 East Main Street Bayshore, Inc. v. Republic Franklin Ins. Co., 904 N.Y.S.2d 740, 742 (N.Y.App.Div. June 29, 2010) (denying summary judgment motion of insurer and finding that policyholder could seek as consequential damages additional lots rental income attributable to delays of insurer in naming appraiser). obviously create poor incentives. But insurers sometime take the “theoretical” “due diligence and dispatch” rule well beyond its purpose and proper scope — even to the point of ignoring its own delays that led to a longer than necessary period. The lesson for insurers is this: adjust the claim promptly and diligently, immediately respond to all requests for approvals to do certain work or hire certain contractors, and promptly issue sufficient advances for repairs to commence and continue. If an insurer does those things, it will have “clean hands” and be in a much better position to identify where the policyholder has delayed. All too commonly, insurers blame policyholders for delays caused by the insurer. This leads to frustration too often felt by companies attempting to recover insurance in the wake of a disaster — when its own insurer adds injury on top of injury.
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