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The Aftermath of 9/11: Courts Reject Policyholders' Attempts to Circumvent the Plain Meaning of Business Interruption Coverage
The terrorist attack on the World Trade Center resulted in a large number of business interruption claims. Stated simply, business interruption coverage is intended to pay the financial losses incurred by an insured during the period necessary to repair the damage caused by an insured loss. Typical business interruption provisions allow for reimbursement of income lost and payment of fixed and continuing expenses. However, business interruption claims are still governed by the general maxim of insurance law: Recovery of insurance proceeds is not intended to place the insured in a better position than it would have been without the loss. Nevertheless, many policyholders are turning to their insurance companies to reimburse them in ways never contemplated by the parties or their insurance contracts. A prime example is the unwarranted attempts to expand the parameters of business interruption coverage in the wake of 9/11.
Recently, two NY courts have specifically rejected policyholders' arguments that the scope of their business interruption coverage should be stretched beyond the plain meaning of its terms and conditions. See Streamline Capital LLC. v. Hartford Casualty Ins. Co., No. 02 Civ. 8123, 2003 WL 22004888 (S.D.N.Y. Aug. 25, 2003); Zurich American Ins. Co. v. ABM Industries, Inc., 265 F.Supp.2d 302 (S.D.N.Y. May 29, 2003). While both decisions are from the U.S. District Court for the Southern District of New York, their holdings have national implications for insurance practitioners. This article will discuss these two decisions and their impact on business interruption claims arising from 9/11.
In Streamline Capital, the former headquarters of Streamline was located in the World Trade Center and was destroyed in the 9/11 terrorist attack. Streamline filed various claims with Hartford Casualty Insurance Company, its property insurer, for physical loss and damage to property, loss of business income and extra expenses. Under the business interruption coverage, business income payments are limited to loss of income occurring within 12 consecutive months after the insured loss. The insured also purchased extended business income coverage, entitling Streamline to additional income coverage up to a maximum of 30 days after the date the property is actually repaired or replaced.
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