A Florida appellate court ruled that coverage for an alleged "business interruption" loss was a duplication of the coverage provided for lost profits. The case is P&G Trucking of Brandon, Inc. v. Riverland Hedging & Topping, Inc., 301 So. 3d 294 (Fla. Dist. Ct. App. 2020).
Riverland Hedging & Topping, Inc. and Clear Zone Maintenance, Inc. (collectively, Riverland) were companies involved in the citrus business in Florida. One day, an employee of P&G Trucking of Brandon, Inc. was driving a company-owned truck when he struck and caused damage to a tractor owned by Clear Zone and a citrus topper owned by Riverland.
Riverland sued P&G and the employee who had been driving the truck for negligence. The suit alleged total losses for both the tractor and the citrus topper as well as lost profits and other "inconvenience and administrative costs" related to the accident. The so-called "inconvenience and administrative costs" pertained to the time and money spent by the principal who managed Riverland and Clear Zone. The principal testified that, between the two companies, he had spent roughly 150 hours managing the aftermath of the accident, including items like travel time, clean up, and dealing with other matters particular to both companies.
As P&G did not contest fault for the accident, both Riverland and Clear Zone received a payment for the property damage and lost profits. The award also included the "inconvenience and administrative" costs asserted for the time the principal had spent to take care of things after the accident. However, P&G filed a motion for partial summary judgment, claiming the "inconvenience and administrative" costs" Riverland asserted were not compensable. The trial court disagreed and "relabeled the inconvenience and administrative claims as 'business interruption' claims." P&G's motion for partial summary judgment was denied, and the jury found in favor of Riverland.
The appellate court took a closer look at awards for what the trial court called "business interruption" claims. The principal's testimony at trial established he had spent a great deal of time handling business matters for Riverland after the accident. However, those hours had not been directly connected to the lost profits for either Riverland or Clear Zone. The judges pointed out that an insured's claim for business interruption coverage was only available "to compensate a business for its lost earnings." (emphasis added). Therefore, since the principal's time had not been spent on matters related to lost profits for Riverland, the money he expended could not be considered "business interruption damages," though the court said it might "qualify as a potential consequential loss."
The judges said the potential consequential loss for the principal's time would constitute a "double recovery" of the lost profits awarded to Riverland. The key factor in determining the lost profits and the consequential expenses was the time period to which the damages applied. The award of lost profits covered Riverland for its lost earnings from the day of the accident to the day it resumed normal operations. The award of consequential damages for the time the principal lost while taking care of things after the accident also ran from the day of the accident to the resumption of normal business. Since the award for lost profits and the award for the "inconvenience and administrative" costs compensated Riverland for the same length of time related to the same accident, paying both claims would be an impermissible double recovery.
The lower court's award of what it called "business interruption" expenses to Riverland was reversed. The appellate judges therefore subtracted the "business interruption" expenses from the damages granted to Riverland and Clear Zone in the lower court.
Editor's Note: Many forms have an option for not only business income, but extra expenses. The coverage for extra expenses provides for situations such as the insured found himself in. In this case, the lost profits awarded in the trial court compensated Riverland and Clear Zone for the profits they lost from the day of the accident to the day their businesses could resume normal operations. The award for "inconvenience and administrative" costs also compensated the company for the time lost between the accident and the resumption of normal operations. This second award was an impermissible double recovery because it was awarded for the same time period as the one contemplated in the award of lost profits.
Part of the issue in this case was the label assigned to the extra expenses. It was the lower court, not Riverland, who assigned the business interruption label to the extra expenses. In its original suit, Riverland made a claim for "inconvenience and administrative" costs, not business interruption. Relabelling damages in this manner is prohibited in the insurance sphere, and it had been an improper move for the trial court to make.
Read More: