Intricacies of Business Interruption Claim Considered

January 07, 2015 — Tred R. Eyerly – Insurance Law Hawaii
Reaching into the weeds to analyze a business interruption claim, the Massachusetts Court of Appeals determined the cost of ordinary payroll could be included in the calculation of net profit or loss in determining business loss income when business is resumed quickly after a fire. Verrill Farms, LLC v. Farm Family Cas. Ins. Co., 2014 Mass. App. LEXIS 145 (Mass. App. Ct. Nov. 4, 2014). The insured suffered a fire loss at its farm store. Within two days, the business was reopened at alternate locations at reduced capacity. Within a month, the business had resumed nearly full capacity in temporary locations. No employees were laid off. This allowed the insured to maintain its business and generate income. The insured submitted a claim for loss of business income, based on its loss of net income in the year after the fire. The insurer paid a sum considerably less than the claim based upon its interpretation of what expenses could be included in a calculation of net profit or loss in order to determine loss of business income. The trial court held that the insurer did not have to pay the cost of ordinary payroll beyond the sixty-day limit, and granted summary judgment in the insurer's favor. Read the full story...
Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii
Mr. Eyerly may be contacted at te@hawaiilawyer.com