Court Opinion

ID: 4925178
Source: CourtListenerOpinion
Date Created: 2021-09-23 21:39:06.341586+00
Date Added: 2024-06-11T08:14:17.877506
License: Public Domain

Poyhonen, J.†
(dissenting) — The majority find ambiguous and vague the meaning of “loss to gross earnings” and “due consideration.”
Were this a question of first impression in the field of business interruption insurance (also called loss of use and occupancy insurance), it would not be difficult for me to accept that finding. But, so far as I am able to determine, the decided cases hold otherwise.
First as to good will. I agree that the respondent must necessarily have sustained a real, monetary loss by reason of the interruption of its restaurant operations. It had been operating for 19 months at an average monthly loss of $3,441, but in the hope and expectation of future profits. The fire impaired the value of the pre-fire investment. It undoubtedly damaged the good will of the business and its expectations of future profits. In this respect, respondent’s plight was not unique. Any business, whether operating at a profit or loss, suffers a probable, or possible, loss of good will and public acceptance when calamity interrupts its operations. After the fire, the respondent had two choices. It could have terminated the business and spent no more money. It decided to continue to spend money to *158get back into business, but in doing so it was not, as the majority say, spending something for nothing. It was investing in the future, just exactly what it had been doing prior to the fire. And it was still spending the same kind of dollars.
But good will and expectations of future profit were not insured. The contract by its terms limited respondent’s recovery to actual loss sustained to gross earnings, during the period of interruption only, and directly resulting therefrom, and excluded other consequential or remote losses.
It appears crystal clear to me that the policy was not good will insurance. As to whether there is good will insurance available in the market, I have no opinion and the evidence does not disclose. But the effect of the majority opinion is to compensate respondent for damage to good will, which was not insured, under the guise of construing the meaning of “loss to gross earnings,” which was insured.
I pass now to the problem of what is meant by “loss to gross earnings” and “due consideration.”
In construction and interpretation of business interruption insurance policies, the courts have uniformly followed and applied the recognized and accepted rules which are applicable to insurance policies generally: (1) that the interpretation must be reasonable; (2) that the contract should be interpreted to give practical effect to the intentions -of the parties; (3) that the language must be given the meaning which a person of ordinary intelligence would attribute to it; (4) that effect should be given to every word and expression'of the policy if possible; and (5)“ that it should be construed in favor of the insured if susceptible of more than one meaning or ambiguously expressed. 83 A.L.R. (2d) 895, 896, and cases cited. However, an ambiguity does not arise merely because the parties differ as to an interpretation of any provision. Foote Mineral Co. v. Maryland Cas. Co., 173 F. Supp. 925. Nor is a court privileged to disregard or distort language of a policy which is plain and unequivocal, nor is it at liberty, under the guise of interpretation, to restrict the meaning of language which is clear. Truck Ins. Exch. v. Rohde, 49 Wn. (2d) 465, 303 *159P. (2d) 659, 55 A.L.R. (2d) 1288; Rew v. Beneficial Standard Life Ins. Co., 41 Wn. (2d) 577, 250 P. (2d) 956, 35 A.L.R. (2d) 891; Firemen’s Ins. Co. v. Lasker, 18 F. (2d) 375; National Children’s Expositions Corp. v. Anchor Ins. Co., 279 F. (2d) 428, 83 A.L.R. (2d) 879; American Alliance Ins. Co. v. Keleket X-Ray Corp., 248 F. (2d) 920.
In interpreting and construing the contract before us, we must be aware of the backdrop of the practices, understandings, terms, and principles generally recognized, accepted, and followed in the insurance world, in the development of which judicial decisions have played their part. In the relatively new field of business interruption insurance, certain practices and principles have emerged, and certain terms and expressions have already acquired commonly accepted and recognized meanings. It is necessary to note the two types of policies commonly written, open and valued.
The valued policy is one in which the value of the loss is agreed upon in advance and the amount to be paid by the insurer is fixed in the policy. Example: An agreement to pay $1,000 a day for each day of shutdown resulting from the occurrence of a peril insured against. Respondent urges that the contract here is a valued policy. It does not appear that the trial court so found, and it is obvious to me that it is not. I have found no decision supporting respondent’s position, and respondent has cited none. The one case cited, Anderson & Middleton Lbr. Co. v. Lumbermen’s Mut. Cas. Co. 53 Wn. (2d) 404, 333 P. (2d) 938, is not in point, since the policy there involved was admittedly a valued one providing for the payment of a fixed sum for each day of loss of use and occupancy.
The open policy is one in which the amount of any loss sustained is not agreed upon in advance, but is to be determined by competent evidence. The earlier policies of this type usually insured (1) net profits prevented by interruption, plus (2) such fixed charges and expenses as necessarily continued during suspension to the extent only that they would have been earned had no interruption occurred, plus (3) expenses incurred to reduce the loss. A *160second type, more common at present, generally known as the gross earnings form, insures loss of gross earnings less charges and expenses saved during the period of interruption. Both open types accomplish the same result. Both recognize that a business operating at a profit is entitled to recover within policy limits its net profits lost, plus the necessary expenses that continue, during the interruption, and that a business operating at a loss is, nevertheless, entitled to recover those expenses which continue during the interruption to the extent that it would have earned them had no interruption occurred. The purpose in either case is to do for the insured just what the business itself would have done, no more or less, had there been no interruption.
83 A.L.R. (2d) 890:
“. . . the purpose of the contract is the payment of profits and legitimate continuing charges or expenses in the event of the loss or destruction of the property; that its purpose is to protect the prospective earnings of the insured business and it might better be termed ‘earnings insurance’; that such insurance was designed to do for the insured in the event of business interruption, just what the business itself would have done if no interruption had occurred; ...”
A case very much in point is Goetz v. Hartford Fire Ins. Co., 193 Wis. 638, 215 N. W. 440. The policy insured against actual loss to net profits plus fixed charges continuing. The insured business had been operating at a loss. The insured argued that the insurer’s liability to pay the continuing fixed charges was absolute and was not dependent uppn whether they would have been earned if interruption had not occurred. The court held that there was no actual loss sustained by the insured, for, as it could not have received from the conduct of the business anything to be devoted to the payment of such fixed charges, it could not properly be considered as having lost such sum which it could not have had, fire or no fire.
It is apparent, then, that the fundamental principle of business interruption insurance is one of indemnity, and a *161showing of pecuniary damage is prerequisite to recovery thereon. National Union Fire Ins. Co. v. Anderson-Prichard Oil Corp., 141 F. (2d) 443; Hartford Fire Ins. Co. v. Wilson & Toomer Fertilizer Co., 4 F. (2d) 835; Hutchings v. Cale-donian Ins. Co. of Scotland, 52 F. (2d) 744; Fidelity-Phenix Fire Ins. Co. of New York v. Benedict Coal Corp., 64 F. (2d) 347; 5 Appleman, Insurance Law and Practice § 3120, p. 277.
It will be found, too, that the term “due consideration” contained in paragraph 1(b) of the policy has acquired a generally understood and accepted meaning synonymous with “practical” or “rational.” Puget Sound Lbr. Co. v. Mechanics’ & Traders’ Ins. Co., 168 Wash. 46, 10 P. (2d) 568; General Ins. Co. of America v. Pathfinder Petroleum Co., 145 F. (2d) 368. The courts have uniformly held that losses shall be determined in a practical way. National Union Fire Ins. Co. v. Anderson-Prichard Oil Corp., supra; Lite v. Firemen’s Ins. Co., 119 App. Div. 410, 104 N. Y. S. 434; Hawkinson Tread Tire Ser. Co. v. Indiana Lumber-mens Mut. Ins. Co., 362 Mo. 823, 245 S. W. (2d) 24.
It seems clear to me that paragraph 1 of Form No. 5, which contains all of the provisions of the policy with which we are here concerned, means only that in the event of a business interruption there shall be a practical and rational approach toward a determination of what actual money, if any, the insured is losing by reason of the interruption and during the interruption only. This interpretation gives effect and meaning to all of the provisions of the policy, is in harmony with the fundamental indemnity principle of insurance, and is in harmony with the decided cases. Any other interpretation ignores the computation of claim provisions entirely and renders them completely meaningless.
This court said in Sears, Roebuck & Co. v. Hartford Acc. & Indem. Co., 50 Wn. (2d) 443, 449, 313 P. (2d) 347:
“. . . Since an insurance policy is merely a written contract between an insurer and the insured, courts cannot rule out of the contract any language which the parties thereto have put into it; . . . ”
*162Respondent’s monthly net operating loss prior to the fire was $3,441. The expenses which necessarily continued during the 3-month period of interruption amounted to $2,933.33 per month. It is readily apparent, then, that the business would not have earned during the 3-month period in question, had no interruption occurred, any part of the expenses which necessarily continued during the period of interruption. Conclusion: There has been no compensable loss under the terms of the policy.
I do not mean to say that respondent was financially better off by reason of the fire. True, it lost less money during the period of interruption than it would have lost during the same period had no interruption occurred. The actual loss was in damage to good will, probability of public acceptance, and expectations of future profits. But, unfortunately, these were not insured.
I would reverse and dismiss the action.

Judge Poyhonen is serving as a judge pro tempore of the Supreme Court pursuant to Art. 4, § 2(a) (amendment 38), state constitution.