Business Interruption Insurance Where Explansion of Business Collapses

Aztar Corp. v. U.S. Fire Ins. Co., 574 Ariz. Adv. Rep. 5 (App., Div. I, January 28, 2010) (J. Barker)

INSURANCE COVERAGE FOR “INTERRUPTION OF BUSINESS, WHETHER TOTAL OR PARTIAL” INCLUDES LOSSES WHERE COLLAPSE OF EXPANSION TO EXISTING BUSINESS OCCURS AND INCLUDES DECREASED PATRONAGE AND UNREALIZED ANTICIPATED PROFITS FROM EXPANSION

Plaintiff Aztar owned the Tropicana Casino and Resort in New Jersey. Plaintiff began building an expansion of the resort on adjoining property to include rooms, food, entertainment and a walkway linking the existing casino to the new addition. Five and a half months before the expected completion six floors of the expansion collapsed. This added six and one half months to clean up the mess and finish the expansion. During part of this time New Jersey shut the main entry street to the casino. The main existing casino remained otherwise fully operational.

Aztar made a claim on its insurance for business interruption losses of $105 million. The defendant insurers denied the claim for business interruption on the basis the main casino was not damaged or shutdown. Ultimately the primary carrier tendered the $5 million policy limits but the excess carriers balked and ultimately won summary judgment at the trial court level.

In this case of first impression the Court of Appeals reversed the trial court holding that “business 'is not limited to the 'operation' or 'ability to use' one's premises, as contrasted with a broader definition that also includes the ability to sell the services available or the goods produced.” As such, the collapse which resulted in less business in the existing casino due primarily to access issues and is a compensable loss under the business interruption provision of the policy.

However, the court affirmed the trial court's decision that anticipated patronage of the new structure was not covered because there was no existing business to interrupt and to allow such damages was too speculative.

Finally the trial court has discretion to award attorneys' fees even when the application for fees is untimely when the court feels it is appropriate and there is no prejudice occasioned by the delay.