When only a portion of a hotel was closed after damage was caused by Hurricane Ike, the court determined there was no coverage for business interruption. H&H Hospitality LLC v. Discovery Specialty Ins. Co., 2011 U.S. Dist. LEXIS 146055 (S.D. Texas Dec. 20, 2011).
Strong hurricane winds caused damage to the hotel, including the loss of part of the roof on one of its buildings. Approximately 40 hotel rooms were unusable after the storm. The hotel, however, had some undamaged, rentable rooms which were rented continuously after the storm. The hotel claimed business interruption losses of $293,191.00, but the insurer only paid $51,971.02.
The policy stated, in part, business interruption damages would be paid during "the necessary suspension of your operations." The insurer argued this meant a complete cessation or stoppage of business activities. The hotel countered that consideration should be given to the nature of the premises at issue in determining what constituted a "necessary suspension of operations."
The court noted that the policy did not define "necessary suspension of your operations." Other courts, however, had interpreted indentical or similar language to cover the risk of a complete cessation of business activities at the covered premises. The business interruption provision in other policies provided coverage for the "necessary interruption of business, whether total or partial." When faced with this language, courts allowed coverage for a partial cessation of business without requiring a total business shut down.
Here, however, the policy lacked such qualifying language to cover the risk of "potential" or "partial" suspension. Thus, the hotel's argument that its policy provided coverage for its reduced business operations, or a partial suspension, lacked support in the plain language of the policy. Accordingly, the insured was entitled to summary judgment on the hotel's business interruption claim.
