AMCO denied the claim. AMCO explained that the property coverage portion of the policy did not extend to their loss because the loss had occurred outside the coverage territory.

Mr. Khurana and Mr. Perry sued AMCO, alleging breach of contract, implied contract, anticipatory breach, promissory estoppel, negligent misrepresentation, declaratory judgment, specific performance, unjust enrichment, and bad faith.

The trial court granted summary judgment in favor of AMCO, and Mr. Khurana appealed.

The Appellate Court's Decision

The appellate court affirmed.

In its decision, it explained that the policy provided two distinct coverages intended to insure Mr. Khurana and Mr. Perry for two different types of loss: property loss (via the “Premier Businessowners Property Coverage Form”) and legal liability (via the “Premier Businessowners Liability Coverage Form”).

The appellate court added that the property coverage form provided insurance for buildings and “business personal property,” and allowed Mr. Khurana and Mr. Perry to be protected from physical damage to their restaurant as well as physical damage to restaurant property such as furniture, fixtures, materials, and supplies as long as the property was within 1,000 feet of the restaurant building.

Essentially, the appellate court said, this form of coverage protected Mr. Khurana and Mr. Perry from physical damage to their restaurant caused by others or an unexpected event. However, it added, only property within the coverage territory, which the policy specified to include the United States, its territories and possessions, Puerto Rico, and Canada, was covered under the policy.

The appellate court then pointed out that the liability coverage form provided insurance in the event the insured business became liable for damage or injury. This type of coverage, the appellate court added, shielded Mr. Khurana, Mr. Perry, and their restaurant, at least in part, from the cost of legal fees, litigation, or the cost of settlement.

The appellate court noted that the policy's liability coverage also was limited to a coverage territory, which the policy specified to include the United States, its territories and possessions, Puerto Rico, Canada, international waters or airspace if the damage or injury occurred during travel between the previously mentioned locations, and all other parts of the world if the damage or injury arose out of (1) goods or products sold by the business owner in the previously mentioned locations, (2) the activities of a person on the business's errand, or (3) offenses that took place through the internet or electronic communication.

The appellate court then rejected Mr. Khurana's argument that the two definitions of coverage territory created ambiguity. Both definitions of the phrase “unambiguously” operated within their separate and distinct sphere of coverage, according to the appellate court.

Applying the “plain meaning” of the words used in both sections of the policy, the appellate court found that the loss of uniforms and decorative items was the type of loss contemplated by the property coverage form – it could fall in the category of covered restaurant property. However, the appellate court ruled because Mr. Khurana and Mr. Perry's loss had occurred in Thailand, “clearly outside the coverage territory of the policy,” it was not covered by the property coverage form.

It then concluded that because the loss of uniforms and decorative items was not the type of loss contemplated by the liability coverage form, Mr. Khurana and Mr. Perry's loss dalso was not covered by the liability coverage form.

The case is Khurana v. AMCO Ins. Co., No. 44854 (Idaho Ct.App. Sep. 29, 2017). Attorneys involved include: Powers Tolman Farley, PLLC; James S. Thomson, II, Boise, for respondent.