Esgro Central, Inc. v. General Ins. Co.

Decision Date08 November 1971
Citation20 Cal.App.3d 1054,98 Cal.Rptr. 153
PartiesESGRO CENTRAL, INC. et al., Plaintiffs and Appellants, v. GENERAL INSURANCE COMPANY OF AMERICA, a corporation, Defendant and Respondent. Civ. 37946, 37947.
CourtCalifornia Court of Appeals Court of Appeals

Gibson, Dunn & Crutcher, F. Lee Coulter, Jr., Wesley G. Howell, Jr., and Richard D. Hall, Los Angeles, for plaintiffs and appellants.

Groff, Dunne, Shallcross & Kane, Mark C. Kane and Russell E. Shallcross, Los Angeles, for defendant and respondent.

THOMPSON, Associate Justice.

Appellants are plaintiffs in consolidated cases (numbers 888874 and 888875) who recovered damages from respondent for breach of contracts of insurance in amounts slightly in excess of their proofs of loss filed with respondent. They appeal from those portions of the judgments which deny them prejudgment interest. We reverse the judgment in case number 888875 with directions to the trial court and affirm the judgment in case number 888874.

Appellants are related corporations operating jewelry, camera, typewriter, and liquor departments at White Front stores as independent concessionaires. One of the stores leased by White Front and occupied by appellants as sublessee was burned and looted during the Watts riot on August 13, 1965. Another store was broken into. Respondent had issued policies of insurance to appellants. One policy insured against loss from fire and the other from loss due to business interruption. The fire policy covered appellants for loss from fire to the policy limits to the extent of the actual cash value of damaged or destroyed property, limited by the amount necessary to repair or replace the property. The business interruption insurance policy insured against loss resulting directly or indirectly from necessary interruption of business caused by damage or destruction to the property occupied by the insured or by riot in the amount of the actual loss sustained by the insured 'not exceeding the reduction in gross earnings less charges and expenses which do not necessarily continue during the interruption of business for only such length of time as would be required with the exercise of due diligence and dispatch to rebuild, repair or replace' the property. That policy also provides: 'This insurance shall not be prejudiced: (1) By an act or neglect of the owner of the building(s) if the insured is not the owner * * * or by the act or neglect of any occupant of the building(s) (other than the named insured) when such act or neglect * * * is not within the control of the named insured.' Gross earnings are defined by the policy.

Both policies require that the insured making a claim present a proof of loss. The fire policy requires that the claim be supplemented by 'a complete inventory of the destroyed, damaged and undamaged property, showing in detail quantities, costs, actual cash value and amount of loss claimed. * * *' The provisions for supplemental information supporting the proof of loss are somewhat less detailed in the business interruption policy. Each policy provides that the insured loss shall be paid by respondent '60 days after proof of loss is received by (respondent) and ascertainment of loss is made.'

Appellants filed proofs of loss and claims with the required supplemental information under both policies of insurance. The proof of loss filed on the fire insurance policy claims the following:

                Loss to inventory                    $88,854.00
                Loss on equipment                    $18,100.00
                Loss on property of customers
                    held for repair                  $ 5,898.00
                Expenses of moving and opening safe  $   284.00
                Cost of repairing salvaged diamonds  $   520.00
                

From the total of $113,609 determined by the addition of those items, appellants deducted the sum of $52,000 paid to them by another insurance company which carried a policy covering loss by looting. The amount paid under that policy included the policy limits of coverage on inventory. The net claim of fire loss by appellants was thus $61,609.

The proof of loss filed on the business interruption policy is divided into four segments: the first relates to business in appellants' jewelry, camera, and typewriter concession at the Central Avenue store of White Front which was completely destroyed by fire in the riot and remained out of operation for a period in excess of 19 months; the second to losses in appellants' liquor concession at that store; and the third and fourth to losses from the camera and liquor concessions of appellants at White Front's Jefferson Boulevard store in which business was interrupted for a period of 5 days. The proof of loss for business interruption in the jewelry, camera, and typewriter concession at the Central Avenue store claims a total of business interruption loss of $79,100 computed as follows:

                Loss of anticipated sales (based upon
                prior 12 months) of $367, 306 on which
                an anticipated gross profit is computed
                at 30% and discount income is
                computed at 7%, resulting in a reduction
                in gross profit for the period of the
                claim of                                  $135,903
                Less noncontinuing expenses of            $ 56,803
                

Appellants' claim is computed upon a similar basis for the other three departments. Their claim of loss for business interruption in the four departments was $102,926. Appellants also claimed a loss of income at other locations of $5,863. Their total claim under the business interruption policy was thus $108,489.

Respondent offered $13,500 in settlement of appellants' claim of $61,609 on the fire policy and $35,000 in settlement of the claim of $108,489 on the business interruption policy. The parties were unable to resolve their dispute concerning the amount due. On July 6, 1966, appellants filed two separate actions, one on each policy. The complaint on the fire insurance policy (case number 888875) prays for damages in the amount of $61,609 and that on the business interruption policy (case number 888874) damages in the amount of $108,799. Each complaint prays for prejudgment interest.

Respondent answered the complaints denying liability in excess of that admitted by its offers made before the actions were filed. On December 22, 1969, the trial court granted appellants' motions to amend the prayers of their complaints to increase the demand on the fire policy to $68,747 plus prejudgment interest, and the demand on the business interruption policy to $165,988 plus prejudgment interest.

The two cases were consolidated and tried to a jury in August 1970. Respondent admitted most of appellants' loss of property covered by the fire policy and defended the action on the theory the appellants' losses of merchandise at the Central Avenue location in excess of those admitted by respondent were excluded from coverage by the policy because they were the result of looting and not fire. Respondent also contended that the cash value of fixtures destroyed in the fire was approximately one-half that claimed by appellants, and that customer merchandise entrusted to appellants for repair was not covered by the policy.

Appellants' proof of loss on its business interruption policy was originally submitted on the basis of a 12-month period of business interruption at the Central Avenue location. At trial, after an amendment of their complaint shortly before trial, appellants claimed damage under the policy based upon an actual period of interruption slightly in excess of 19 months. Respondent defended on the theory that: (1) the premises occupied by appellants on Central Avenue could have been restored in no more than 7 months if due diligence had been exercised; (2) the preceding 12-month sales were not a fair basis of projection of anticipated income because of a declining trend in earnings; (3) certain expenses (particularly the salaries of four employees) were noncontinuing and therefore not properly within the claim; and (4) a relatively small portion of the claim resulted from remote or consequential losses in business.

Appellants' evidence tended to establish a greater amount of loss than that prayed in its complaints as amended. It was granted leave to amend its complaints to conform to proof. The jury found for appellants, awarding them damages of $63,776 on the fire policy and $122,355 on the business interruption policy. Appellants moved, pursuant to Civil Code section 3287, subdivision (a), for the award of prejudgment interest from the date its claims became due and, alternatively, for prejudgment interest from the date of filing suit pursuant to Civil Code section 3287, subdivision (b). 1 Respondent filed a motion for new trial but no declaration in opposition to the motion for interest. The trial court denied the motion for new trial and also denied appellants' motion for prejudgment interest. It stated, in denying that motion: 'I am very frank to tell you that I think the plaintiff got a very, very substantial judgment in this case based on the facts as I heard them; and now, to come in and ask for interest on something that was as uncertain as this is seems to be pouring on a little.'

Neither party has appealed from that portion of the judgment of the trial court entered on the jury verdict. Appellants raise only the issue of the propriety of the trial court's action denying their motions for prejudgment interest. We conclude that the trial court's denial of interest was erroneous in the suit on the fire policy and correct in the action on the business interruption policy.

Civil Code section 3287 provides in subdivision (a): 'Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day * * *.' 2

Damages are deemed certain or capable of being made certain within the provisions of subdivision (a) of section...

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