Defense Counsel Journal - International Association of Defense ...

Page 430 DEFENSE COUNSEL JOURNAL–October 2012authority from other jurisdictions, we findthat ‘interruption of business’ is anunambiguous term meaning ‘cessation orsuspension of business.’ Therefore,Quality was not entitled to businessinterruption coverage for the workslowdown it experienced, and we find thetrial court did not err in grantingMichigan's motion for summaryjudgment.” 59The burden rests with thepolicyholder to prove that it is entitled tocoverage and the amount of thatentitlement. 60 In Fold-Pak Corp. v.Liberty Mut. Fire Ins. Co., the plaintiffmanufactured and sold various types offolding food containers. 61 Nearly one-halfof the plaintiff’s business was the sale ofso-called “food pails” typically used inChinese restaurants to package takeoutfood. On April 9, 1989, a fire at theplaintiff’s plant destroyed “flexologyequipment” which was used tomanufacture the food pails. 62 As a result,plaintiff had to use a more expensiveprocess to make food pails. The defendantinsurer paid the plaintiff for the loss ofthe Flexo machine, and advanced$250,000 towards its claimed losses.Subsequently, the plaintiff submitted aclaim for $4,081,471, claiming itsdamages were recoverable under theBusiness Interruption coverage providedby the policy. Of this amount, the plaintiffdesignated $1,479,940 as “Loss ofProduction” and $2,601,531 as “ExtraExpenses.” The “Extra Expense” claimconsisted of $2,077,984 in “Increased59 Quality Oilfields, 971 S.W.2d at 639.60 Cora Pub. Inc. v. Continental Cas. Co., 619F.2d 482 (5th Cir. 1980).61 784 F. Supp. 49 (W.D.N.Y. 1992).62 Id. at 51.Cost of Production,” $200,250 in“Management Expediting Expenses” andvarious other extra expenses. Thedefendant did not pay these full amounts,resulting in the coverage action. Theplaintiff sought $4,000,000 in damages.With regard to the loss of productionclaim, the plaintiff determined that, butfor the fire, it would have produced274,444,000 food pails at its plant. Thiswas 35 percent more food pails than itproduced during that same period in theprevious year. Moreover, the plaintiffestimated that the fire prevented it fromproducing 84,568,000 more pails than itactually produced during the relevantperiod. Questioning the plaintiff’s figures,the court stated, “Despite plaintiff'scalculation of lost profits, I find thatplaintiff has failed to show that thisalleged 84,568,000 pail shortfall, even ifit was caused by the fire, caused any lossof income.” 63 The court continued, “Thus,even if plaintiff had produced the pails,nobody was standing in line to buy them.There is no evidence that plaintiff wasunable to produce food pails in sufficientquantity to meet its customers'demands.” 64 The court held that given thecomplete absence of supporting evidencein favor of the plaintiff the court wasrequired to grant summary judgment tothe insurer.Business Interruption coverage canbe an important risk shifting option for acompany, however coverage remainsdependent upon a physical loss to theinsured. Coverage may not be applicableto a break in the supply chain where theinsured does not suffer a physical loss,63 Id. at 53.64 Id. at 54.