WS Shamban & Co. v. Commerce & Industry Insurance Co.
| Decision Date | 14 May 1973 |
| Docket Number | No. 26863.,26863. |
| Citation | 475 F.2d 34 |
| Parties | W. S. SHAMBAN AND COMPANY, a corporation, Appellee, v. COMMERCE AND INDUSTRY INSURANCE COMPANY, a corporation, and Does I through V, Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
David C. Bogert (argued), Richard B. Wolf, of Long & Levit, Los Angeles, Cal., for appellant.
Herbert N. Wolfe (argued), of Low & Stone, Beverly Hills, Cal., for appellee.
Before BARNES and WALLACE, Circuit Judges, and ENRIGHT,* District Judge.
This appeal resulted from an action brought by W. S. Shamban and Company against its insurance carrier for breach of the insurance provisions in which the insurance carrier, Commerce and Industry Insurance Company, failed to pay to its insured amounts due under a business interruption policy in force during a fire at the Fort Wayne, Indiana, plant of plaintiff.
On April 12, 1967, a fire at plaintiff's plant damaged one production oven and temperature control mechanism of the oven, together with machinery used for processing metal parts. In addition, a recently installed device known as a "Gatlin Gun Sintering Rack," used in a revolutionary method for producing "core molded" tubes was destroyed.
At the time of the loss there was in effect a policy of insurance between plaintiff, as insured, and defendant, as insurer, under which defendant agreed to indemnify plaintiff for business interruption loss caused by such a fire. More specifically, the policy insured plaintiff against:
"direct loss of earnings on operations which, had they not been prevented would have taken place during . . . the length of time which would have been required with the exercise of due diligence and dispatch to repair, rebuild or replace such of the described property as has been damaged."
The policy defined "loss of earnings" as:
"the loss to the insured disclosed by comparing actual income and expense . . . for whatever period is affected with estimated income and expense for the same period assuming there had been no loss."
Plaintiff was awarded judgment in the sum of $121,000 by the trial court.
Appellant before this court contends the lower court improperly computed appellee's losses for two reasons. First, defendant maintains that in making Finding of Fact Number 6, the trial court improperly relied upon an unrepresentative prior year's increase in estimating lost sales for the period of business interruption (suspension period). Secondly, defendant argues that in Finding of Fact Number 6(c), the lower court erred in impliedly determining that plaintiff would have earned 27.58% more sales revenue during the suspension period without incurring any additional labor costs.
The lower court determined that the suspension period was three and one-half months. Following the formula required in the insurance contract, the court projected sales revenue for this period using Shamban Company's sales performance record as a gauge. Specifically, the court used the rate of growth of sales reflected in the 12 months immediately preceding the suspension period. This figure was 27.58%.
Appellant insurance company objects to this figure as being unrepresentative of the company's growth record. Appellant aptly points to the growth rate in the year ending March 31, 1966, being 15.79%, and in the year ending March 31, 1965, being 15.79%. Thus, defendant argues, 1967 was an exceptional year which should not be exclusively used.
On the other hand, defendant offers little persuasive evidence that such a growth rate would not continue, at least over the short run. It should be remembered that the base year elected by the trial judge was the 12 month period immediately preceding the fire and ensuing suspension period.
Accordingly, we find that the trial court's findings on this issue are supported by the evidence, and we concur in those findings. Rule 52(a) Federal Rules Civil Procedure, 28 U.S.C.A.; Ruud v. American Packing & Provision Company, 177 F.2d 538 (9th Cir. 1949).
Defendant, on appeal, also contends that the lower court erred finding that plaintiff would have earned 27.58% more sales revenue during the three and one-half month suspension period without incurring any additional labor cost. Defendant's argument that this finding is not supported by the evidence is well taken.
Both parties agree that plaintiff is entitled to be reimbursed only for the difference between projected sales revenue and projected cost of goods sold. In this case the trial judge apparently found there would be no concomitant rise in labor cost with a 27.58% rise in sales. Plaintiff contends this result is supported by evidence of record that the new Gatling Gun process greatly increases productivity.
We cannot agree. As defendant points out, the Gatling Gun process is only one stage of...
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