A business interruption claim survived an appeal after it was determined the claim was satisfactorily presented to the trial court. Citadel Broadcasting Corp. v. Axis U.S. Ins. Co., 2015 La. App. LEXIS 274 (La. Ct. App. Feb. 11, 2015).
When Hurricane Katrina hit on August 29, 2005, the insured owned three radio stations that broadcast in and around New Orleans. All three stations suffered property damage and were off the air for varying periods of time.
The insured's policy with Axis covered both physical damage and business interruption (BI) losses. The policy also insured contingent business interruption income (CBI). Both ordinary BI and CBI losses were covered under a 365 day extended period of indemnity (EPI).
After the storm, the insured filed its claim. Initially, Axis paid $414,092 (after deductible) for property damage and $1,277,760 for business interruption lost profits during the period of restoration. Axis also paid loss adjustment expenses of $250,787 for work AON Risk Services, Inc. performed to calculate and present the insured's claim to Axis. Axis refused to pay ordinary BI claims during the EPI , however, or any part of the insured's CBI claims.
The insured sued for breach of contract and for bad faith. The jury awarded the insured $3,273,237 for all lost profits during the 365 days after each of the three radio stations had returned to operation. The jury awarded $2,383,751 for CBI losses subsequent to the 365 days through June 30, 2007. The jury further awarded damages for bad faith in the amount of $2,953,494 and attorneys' fees of $2,953,494.
Axis appealed. It argued the insured failed to prove that certain losses were a direct result of Hurricane Katrina. But the insured only needed to prove its business interruption losses with "reasonable certainty." Broad latitude was given in proving lost profits because this element of damages was often difficult to prove and mathematical certainty or precision was not required. The insured did not need to prove its loss on a customer-by-customer basis. The insured's BI losses were to be determined based on the "actual loss sustained," by comparing the insured's expected performance prior to Hurricane Katrina with its actual performance thereafter. Here, there was sufficient evidence to support the jury's finding that the insured sustained covered losses of $5,906,988.
The court also upheld the award for bad faith. Axis received the calculation of the insured's loss in December 2006. Axis failed to make any payment on the claim within the applicable statutory period when it was aware that some of the losses were covered.
The attorneys' fee award, however, was vacated and remanded because the award was not supported by any record evidence.