Washington Restaurant Corp. v. General Ins. Co. of America, 36745
| Decision Date | 09 April 1964 |
| Docket Number | No. 36745,36745 |
| Citation | 64 Wn.2d 150,390 P.2d 970 |
| Parties | WASHINGTON RESTAURANT CORPORATION, doing business as Maison Blanc, Respondent, v. GENERAL INSURANCE COMPANY OF AMERICA, Appellant. |
| Court | Washington Supreme Court |
Clarke, Clarke, Albertson & Bovingdon, Seattle, for appellant.
Byron D. Coney, Seattle, for respondent.
The Washington Restaurant Corporation, operating the Maison Blanc restaurant in Seattle, sued General Insurance Company to recover under an insurance policy, ostensibly covering a business interruption loss resulting from fire. This appeal is from a judgment against the insurance compamy for the full amount of the policy, $9,000, plus interest from October 29, 1960.
The provisions of the contract (fire insurance policy) which are pertinent to the problem of coverage in this appeal are as follows:
'9000.00 ON GROSS EARNINGS * * * (SHORT FORM) * * *
'
and Form 570-XNS, attached thereto, reads in part as follows:
'* * *
'1. The 'Gross Earnings' Item shall cover the actual loss sustained to Gross Earnings directly resulting from necessary interruption of business caused by damage to or destruction of real or personal property on the described premises by the peril(s) insured against during the term of this policy.
'(a) Limits of Liability:
'(1) This company shall be liable for loss occurring during only such length of time as would be required with the exercise of due diligence and dispatch to rebuiled, repair or replace such part of the real or personal property on the described premises as has been damaged or distroyed * * * '(2) The liability of this company shall be limited to thirty-three and one-third per cent (33 1/3%) of the amount specified for this item for any one period of thirty (30) consecutive calendar days
'* * *
'(b) Computation of Claim: In the computation of any claim under this Item due consideration shall be given (1) to the experience of the business before the date of damage or destruction, and to the probable experience thereafter, had no loss occurred; (2) to the saving of or to the continuation of normal charges and expenses, including payroll expense, to the extent necessary to resume operations of the Insured with the same quality of service which existed immediately preceding the loss; * * *'
The Maison Blanc was for many years a popular and profitable restaurant in Seattle, but subsequent to the death of its founder and guiding spirit it became involved in financial difficulties. Ultimately, it was sold to Homer W. Robinson, an old-time patron of the establishment. He organized the respondent corporation, of which he was sole owner, for the purpose of restoring this once famous epicurians' delight to its former glory. After 19 months under the hopeful new setup, a damaging fire occurred on the premises, and necessitated closing the restaurant. The trial court found that repairs and restoration of the premises could not have been accomplished in less than 3 months. The Maison Blanc's average monthly operating experience for the 19 months prior to the fire had been:
Total income from sales ...... $13,384.00
Cost of food and liquor ....... 5,939.00
-----------
Gross profit or earnings ..... 7,445.00
Operating expenses ......... 10,886.00
-----------
Monthly net operating loss .. $--3,441.00
Although the monthly net loss averaged $3,441 prior to the fire, the expenses which necessarily continued after the fire averaged only $2,933.33 for the first 3 months. It is therefore readily apparent that the net operating loss was actually reduced during the period. In the trial court it was the primary contention of the insurance company that, on the basis of the above accounting, the fire, in effect, saved money and caused no loss to the insured--or at least no loss covered by the terms of the policy.
The trial court found, however, that the policy had insured the gross earnings or profits of the business rather than the net profit or loss. As this gross-earnings figure was in excess of the $3,000 per month limitation of the policy, judgment was entered for plaintiff-respondent for the entire face value of the policy, $9,000; i. e., $3,000 per month for 3 months.
On this appeal the insurance company again contends that there was no loss to the business which could be attributable to the cessation of operations, and, therefore, respondent had no insurable interest in the gross profits of the business. Appellant further contends that, regardless of the nature of any possible loss sustained by the respondent, the loss was not one which was covered by the clear and unambiguous terms of the policy.
The first step in the solution of the instant case is to evaluate the consequences of the fire to ascertain whether any insurable loss was suffered by the insured. With this accomplished, the remaining problem is to evaluate and determine the scope of the insuring language used by the insurance company, keeping in mind the rule that if the insuring language is ambiguous, i. e., if reasonable men could differ as to whether it fairly covered the loss sustained, then the insured must prevail. The rule is well established that language should be construed in favor of the insured if it is susceptible of more than one meaning. 83 A.L.R.2d 895.
The actual monetary loss sustained by the insured as a result of the fire can be understood more readily in a broad business sense, perhaps, than in terms of the technique and terminology of the accountant, particularly if we contrast or distinguish (a) the operating loss of a continuing or going business and (b) fixed expenses or loss attributable to business interruption or closure. Expenses of $2,933.33 per month continued after the closure of the business. This represented a cash outlay by the respondent for which it could receive nothing--neither a present return nor hope for a future one. While an accountant might consider the end result as a reduction in net operating loss (being loss than the $3,441 monthly loss prior to the fire), no business man would call it a saving in the sense that positive and affirmative business benefits accrued to the insured. The pre-fire loss certainly has an entirely different quality from the loss occasioned by the expenses which continued after closure. Although, undeniably, the pre-fire loss did amount to a loss in an accounting sense, in a business sense it could be called an investment--common in new businesses--in future earnings and good will. The insured, a man of no small business ability, considered this $3,441 monthly outlay as being made for a valid business purpose. He believed he was receiving a quid pro quo of dollar value for every dollar so spent, and voluntarily continued the outlay.
Quite to the contrary, however, was the cash outlay which could be anticipated as continuing even if the business was closed. The expenditure of something for something would become an expenditure of something for nothing. Surely the prudent business man would begrudge an anticipated monthly expenditure of $3,000 (the actual amount proved to be $2,933.33) paid for nothing, even when he was willing to gamble a greater amount for the prospect of future returns. And, if these anticipated continuing expenses would be a less desirable type of 'loss,' then it is not surprising that Robinson, the owner-promoter, evidenced a desire to carry insurance which would pay an amount which would cover these continuing expenses if the business should be interrupted due to fire.
There is considerable evidence that in this transaction Robinson both asked for and thought he received a type of insurance which would provide a fund to pay continuing expenses, regardless of whether the restaurant was at the time of the loss in a profit position. In this connection, it seems apparent that the owner, Robinson, anticipated some losses in attempting to reestablish the business. The plaintiff's insurance broker, J. G. McCrary, testified as follows concerning his understanding with Mr. Hemion, the underwriter for the defendant insurance company:
'Our conversation, our discussion as to how much and what form was quickly relegated pure and simply to continuing expenses, since there was no precedent, no history to insure gross earnings as such, to insure income as such * * *
'* * *
'* * * That is how it relegated itself to this subject; We don't know how well they're going to do; We do not know what earnings to insure; But we do know what the continuing expenses would be; can we insure continuing expenses, and the underwriter's answer was, yes, that under this short form we can insure continuing expenses.
'* * *
'* * *
'* * * between the assured and the underwriter, Mr. Hemion, it was agreed that 3 months would be a suitable period to continue the indemnity; that these costs, for instance, to keep a chef on the payroll, to meet the continuing expenses, the 3 months would be adequate.'
It might be noted that the estimate of $3,000 for insurance coverage was very close to what the continuing expenses would be, the actual figure being $2,933.33. To sum up: apparently the insured, the insurance broker, and the insurance underwriter all thought that the policy issued would provide a flow of income, in lieu of gross earnings, sufficient to cover the continuing expenses of the restaurant while it was closed. The trial judge found that the insured had the right, after paying his...
To continue reading
Request your trial
-
E-Z Loader Boat Trailers, Inc. v. Travelers Indem. Co.
... ... No. 51865-3 ... Supreme Court of Washington, ... Oct. 9, 1986 ... [726 P.2d ... Dickens, Seattle, for respondent Highlands Ins ... [726 P.2d 441] Bryan ... Travelers' standard comprehensive general liability coverage, as well as additional ... Prudential Ins. Co. of America, 86 Wash.2d 432, 434-35, 545 P.2d 1193 (1976): ... Washington Restaurant Corp. v. General Ins. Co. of America, 64 Wn.2d ... ...
-
Morgan v. Prudential Ins. Co. of America
... ... No. 43765 ... Supreme Court of Washington, En Banc ... Feb. 5, 1976 ... [545 P.2d ... Washington Restaurant Corp. v. General Ins. Co. of America, 64 Wash.2d 150, 390 ... ...
-
Milliron v. United Ben. Life Ins. Co., 1854-III
... ... No. 1854-III ... Court of Appeals of Washington, Division 3 ... July 14, 1977 ... In that action, plaintiff made claim for general and special damages ... That case was ... Washington Restaurant Corp. v. General Ins. Co. of America, 64 Wash.2d ... ...
-
Dickson v. U.S. Fidelity & Guaranty Co.
... ... No. 39451 ... Supreme Court of Washington, En Banc ... March 12, 1970 ... Insurance Co. of North America v. Board of Educ. of Independent School Dist. 12, ... Co. v. St. Paul Fire & Marine Ins. Co., 72 Wash.2d 682, 434 P.2d 725 (1967); Safeco ... 211, 432 P.2d 537 (1967); Washington Restaurant Corp. v. General Ins. Co. of America, 64 Wash.2d ... ...