Opinion ID: 1510876
Heading Depth: 1
Heading Rank: 1

Heading: Change in Business.

Text: One of the principal contentions of defendants is that the opening of seam No. 12 constituted such a change in plaintiff's business that the policies issued had no application to it, being issued to cover a business the experience of which related to mining seams Nos. 7 and 10. Their argument, in effect, is that the purpose of use and occupancy insurance is to insure the earnings of an established business, the earnings of which can be determined by experience, and that, when such a change is made in the business as will nullify the probative force of experience, the policy itself is nullified. We are not impressed with this contention as applied to the facts here. It may well be that a change in business of such a radical nature as to make it entirely different from that which was insured by use and occupancy or business interruption insurance would avoid the policy, or rather render it inapplicable to the risk, on the principle that the parties did not contract with reference to the business resulting from the change. This principle is applied in the somewhat analogous case of bonds guaranteeing the performance of contracts but permitting additions to and alterations of the work to be performed, where there is a complete departure from the original contract and the undertaking of an independent enterprise. See Maryland Casualty Co. v. City of South Norfolk (C. C. A. 4th) 54 F.(2d) 1032, and cases there cited. We think, for instance, that a use and occupancy policy on a warehouse would not be held to cover the loss of profits of a cotton factory which the owner might begin operating in the warehouse after the issuance of the policy. But the evidence here discloses no such radical change in the business of plaintiff. That business was the mining and sale of coal; use and occupancy insurance was sought on the head house, tipple, etc., because it was realized that the destruction of these would interfere with that business; and it is precisely that business which has been interrupted by their destruction. The business of plaintiff involved many factors other than the getting out of coal from the seams in the side of the mountain. Valuable machinery and equipment had been installed; a business organization had been built up; a force of miners had been gathered in a village built for their accommodation; a sales organization had been developed; and a demand for the coal produced by the mine had been established. In such a situation, the further development of one seam of coal and the abandonment of another found to be unprofitable is in no sense a radical or revolutionary change in the business; and, even though it may greatly increase profits, it does not render valueless the experience of the business in estimating what profits are to be anticipated. We see no reason why, with the knowledge of the cost of getting out the coal from the new seam, which must be acquired as the work of opening up progresses, profits cannot be estimated in the light of the experience of the business as well as if the change had not been made. We do not apprehend that a use and occupancy policy on a shoe factory would be avoided because improved machinery had been installed to care for a part of the process of manufacture; nor a policy on a lumber plant, because the owners had begun operating in a different tract of timber. Forfeitures are not favored either at law or in equity; and, if insurance companies intend that use and occupancy policies shall be avoided because of such changes, they should insert conditions to that effect in their policies. That the change now relied on was not deemed material before loss is shown by the fact that the Liverpool, London & Globe was advised of the opening of seam No. 12 and the hope of increased profits to result therefrom, and, instead of suggesting that this was a reason for not issuing the policy, it wrote its agent suggesting that plaintiff was entitled to insurance in the sum of $375,000. It does not affirmatively appear that the other defendants had the information furnished the Liverpool, London & Globe; but they either acted on this or without information, being satisfied to guarantee the profits of plaintiff's business for the premiums involved, without making inquiry either as to past experience or future hopes. In either situation, they are hardly in position to say that the risk was different from that contemplated by them.