Ramada Inn Ramogreen, Inc. v. Travelers Indem. Co. of America

• Decision Date: 13 January 1988
• Docket Number: No. 87-5177,87-5177
• Citation: 835 F.2d 812
• Parties: RAMADA INN RAMOGREEN, INC., d/b/a 1800 Palm Beach Lakes Blvd., Plaintiff-Appellant, v. The TRAVELERS INDEMNITY COMPANY OF AMERICA, Defendant-Appellee. Non-Argument Calendar. United States Court of Appeals, Eleventh Circuit
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 812

835 F.2d 812

RAMADA INN RAMOGREEN, INC., d/b/a 1800 Palm Beach Lakes Blvd., Plaintiff-Appellant, v. The TRAVELERS INDEMNITY COMPANY OF AMERICA, Defendant-Appellee.

No. 87-5177

Non-Argument Calendar.

United States Court of Appeals,

Eleventh Circuit.

Jan. 13, 1988.

John C. Randolph, W. Palm Beach, Fla., for plaintiff-appellant.

Herbert J. Baumann, Tampa, Fla., for defendant-appellee.

Appeal from the United States District Court of the Southern District of Florida.

Before RONEY, Chief Judge, HATCHETT and ANDERSON, Circuit Judges.

RONEY, Chief Judge:

In this diversity insurance case, plaintiff, Ramada Inn Ramogreen, Inc., appeals a district court decision that, as a matter of Florida law, the hotel's decrease in room occupancy due to the loss of its restaurant by fire is not a covered loss under the defendant insurance company's business interruption policy. We affirm.

On July 2, 1983, The Traveler's Indemnity Co. of America, issued a fire insurance policy on plaintiff's hotel and restaurant in West Palm Beach, Florida. On April 10, 1984, a fire damaged the building which housed plaintiff's restaurant, but did no harm to the four buildings containing hotel rooms. The insurance company paid $172,500 for loss of earnings at the restaurant under the business interruption provisions of the policy. Plaintiff claims it was entitled to collect under the business interruption provisions for the decline in occupancy of the hotel facility that resulted from the closing of the restaurant. The district court entered summary judgment on the ground that Florida law, applicable to this diversity case, prohibited a recovery for that loss.

The policy provided in part that the insurance company would insure Ramada, "against loss of earnings resulting directly from the necessary interruption of the insured's business caused by loss or damage by a peril insured against to a building or personal property on the premises designated in the declarations." The hotel was designated as "Location 1, [Building] 1 thru 4." It was insured for the aggregate amount of $287,500. The restaurant was designated "Location 1, [Building] 5," and it was insured for a total of $172,500.

The district court in this case relied heavily upon Hotel Properties Ltd. v. Heritage Insurance Co. of America, 456 So.2d 1249 (Fla. 3d DCA 1984), petition for review denied, 464 So.2d 555 (Fla.1985), the only Florida case dealing with this issue. The facts in the two cases are virtually identical. In Hotel Properties, a hotel owner filed a claim against its insurance company for the loss of its restaurant due to a fire. The hotel based its claim against the insurance company on the business interruption clause of its insurance policy which covered the restaurant as well as the hotel operation.

The applicable language in the policy at issue in the Hotel Properties case is similar to the pertinent language in the instant case. The court in Hotel Properties held that the diminution in business caused by the unavailability of the restaurant did not constitute an interruption of the hotel's business within the policies in question. The opinion succinctly stated the law in Florida concerning this issue: a decrease in hotel occupancy due to loss of a restaurant is not a loss covered under the hotel business interruption policy.

Ramada contends that Hotel Properties is distinguishable because it involves a hotel which leased out its restaurant facility to a business tenant while in the instant case, the restaurant was both owned and managed by the hotel. This distinction is important, according to Ramada, because it indicates that the restaurant in Hotel Properties was an operation independent of the hotel. In the instant case, Ramada argues, the restaurant was not a separate operation, but was instead a "vital part of the hotel operation, each operation being mutually dependent upon each other, citing Studley Box and Lumber Co. v. National Fire Insurance Co., 85 N.H. 96, 154 A. 337 (1931). In Studley, a fire in a stable burned some of the horses which were used in the operation of the lumber plant. Without the horses, the plant was unable to continue its operations. The court held that the insured would be compensated for the partial suspension of his business.

Ramada's argument misconstrues the nature of the business interruption policy and the concept of mutual dependency. In Studley, the court said the purpose of the policy is to "insure against consequential loss to the insured's business carried on...