If a policy's deductible does not apply to "ensuing loss or damage," is indirect business interruption an ensuing loss? The court in RTG Furniture Corp. v. Industrial Risk Insurers, 2008 U.S. Dist. LEXIS 85237 (S. D. Fla. Oct. 9, 2008) faced this issue, noting it was a question of first impression nationwide.
The insured had an all risk policy with a $5 million "Name Storm Occurrence Deductible" ("NSO Deductible"). The NSO Deductible applied a $50,000 deductible for all losses arising out of any one occurrence. For losses resulting from a Named Storm Occurrence, however, a maximum deductible of $5 million for each occurrence applied. However, the deductible did not apply to "ensuing loss or damage not otherwise excluded."
The insured made a claim for business interruption losses caused by three hurricanes in 2004. It maintained all its losses "ensued" from the Hurricanes and therefore fell outside the $5 million NSO Deductible. It argued "ensuing" loss implied an element of indirect loss. The losses sustained by the insured did not derive from direct physical damage to the store location claiming the loss, but rather from intervening acts of civil authority, interrupted ingress/egress, power interruptions, etc. which interrupted business at store locations, but there was no direct physical damage.
The insurer refused to pay the claims, contending the losses did not exceed the $5 million NSO Deductible. It argued the claimed losses were not "ensuing" because they were not wholly separate and distinct from loss caused by the peril (windstorm) which was subject to the Deductible.
Both parties moved for summary judgment. The policy did not define "ensuing loss." Neither party cited cases which demonstrated the use of the phrase in a policy deductible. Therefore, the court determined the meaning of the term "ensuing loss" as used in the NSO Deductible was ambiguous. Therefore, extrinsic evidence could be considered to determine the intent of the parties and to clarify the ambiguity. The court denied both motions for summary judgment on the construction of the NSO Deductible because a genuine issue of fact on the issue of the parties' intent existed.
