Business Income Provision
Insurer National Fire Insurance issued an insurance policy to Cimco, naming Cimco as policyholder. In June of 2004, a flood damaged the policyholder’s facility and its equipment covered under the policy. The policyholder filed a claim for its losses due to the flood that included loss of business income between the flood date and December, 2005. The insurer willingly paid the policyholder its losses for the three-month period between the date of the flood and the date the equipment was repaired but refused to pay for any claimed losses beyond that point.
The central question on summary judgment dealt with the proper construction of the business income provision of the policy. The insurer argued that the business income provision of the insurance policy only applied to losses incurred during the three-month restoration period. The policyholder argued that the provision encompassed all losses incurred for up to 12 months after the date of the flood.
The policy also contained an extended business income provision indicating that it was intended to cover any losses incurred for up to 30 days after the end of the period of restoration. Under the policyholder’s interpretation, the business income provision would cover the policyholder’s losses for 12 months after the date of the flood. However, the extended business income provision would cover the policyholder’s losses for only a maximum of four months after the flood, given that the period of restoration lasted three months.
The court concluded that this would mean that the business income provision would cover more losses than the extended business income provision, rendering the “extended” provision meaningless and would be an unreasonable result. The court held that the business income provision covered only those losses sustained during the three-month period of restoration that followed the flood.
Cimco Communications, Inc. and Vascom, Inc. v. National Fire Ins. Co. of Hartford, 347 Ill.Dec. 986, 943 N.ZE.2d 276 (Ill.App. 1 Dist., 2011).
