MILK INDUSTRY MANAGEMENT CORPORATION v. TRAVELERS INDEMNITY COMPANY OF AMERICA

Filing 50

OPINION. Signed by Judge Noel L. Hillman on 8/30/2018. (tf, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MILK INDUSTRY MANAGEMENT
CORPORATION, trading as
BALFORD FARMS,

1:16-cv-02403-NLH-AMD
OPINION

Plaintiff,
v.
TRAVELERS INDEMNITY COMPANY
OF AMERICA,
Defendant.

APPEARANCES:
DAVID C. KISTLER
ROBYN LEIGH MICHAELSON
STEPHEN M. ORLOFSKY
BLANK ROME LLP
300 CARNEGIE CENTER, SUITE 220
PRINCETON, NJ 08540
HENRY M. KULLER (admitted pro hac vice)
BLANK ROME LLP
ONE LOGAN SQUARE
130 NORTH 18TH STREET
PHILADELPHIA, PA 19103-9668
JOHN A. GIBBONS (admitted pro hac vice)
BLANK ROME LLP
1825 EYE STREET NW
WASHINGTON, DC 20006
On behalf of Plaintiff
YALE GLAZER
LAZARE POTTER & GIACOVAS LLP
875 THIRD AVENUE, 28TH FLOOR
NEW YORK, NY 10022
On behalf of Defendant
HILLMAN, District Judge
Presently before the court are Plaintiff’s and Defendant’s

cross-motions for partial summary judgment regarding Plaintiff’s
claim for business income insurance and extended business income
insurance.

The parties’ dispute arises out of the termination of

Plaintiff’s dairy distribution contract caused by a catastrophic
fire at the storage facility used by Plaintiff.

For the reasons

expressed below, Plaintiff’s motion will be denied, and
Defendant’s motion will be granted.
BACKGROUND
Milk Industry Management Corporation (“MIMCO”), trading as
Balford Farms, is a distributor of butter, cheese, fluid milk,
and associated dairy and other food products for its own account
and the accounts of third parties.

On July 30, 2012, MIMCO and

Dairy Farmers of America (“DFA”) entered into a Warehousing and
Distribution Services Agreement (the “DFA Services Agreement”)
and an Asset Purchase Agreement (collectively, the “DFA
Agreements”).

Under these agreements, MIMCO acquired the right

to receive, store, warehouse, load out, and distribute seventy
million pounds annually of DFA’s products to DFA’s customers for
a term of five years, automatically renewing for subsequent twoyear terms.
On August 20, 2012, MIMCO entered into a Warehouse Services
Agreement with Black Bear Distribution LLC (“Black Bear”) for the
purpose of subcontracting the receipt, storage, and load out of
DFA’s product to MIMCO trucks at Black Bear’s frozen and
2

refrigerated warehouse storage facilities located in Delanco, New
Jersey.

MIMCO commenced distributing product to DFA’s customers

in September 2012.
At approximately 1:30 p.m. on September 1, 2013, a fire
broke out on the roof of the Black Bear Facility.

Firefighters

were unable to contain the fire for over twenty-four hours.

The

Black Bear Facility collapsed and was completely destroyed.

On

September 13, 2013, MIMCO terminated its contract with Black Bear
under the Force Majeure provisions of the contract because Black
Bear no longer had the ability to perform the contract due to the
fire and the complete destruction of its warehouse.
MIMCO claims that in an effort to mitigate its losses and
continue operations under the DFA Agreements, MIMCO attempted to
procure alternate warehouse space and services capabilities.
MIMCO claims that it was unable to find any warehouses that had
the capacity to warehouse all of DFA’s product and to provide the
logistical, technological, and other services required by DFA
that Black Bear had provided prior to the fire.

MIMCO eventually

located an alternate warehouse with space and capabilities
sufficient to maintain only a portion of the DFA-required
storage, capabilities, and deliveries, but this alternate
location did not provide MIMCO with the ability to fully provide
the services it rendered to DFA prior to the fire, and it imposed
extra costs, such as for warehousing, transportation, and labor.
3

In June 2014, Black Bear’s affiliate announced it would not
re-build in the same geographical area or on the same scale as
the Black Bear Facility.

MIMCO claims that effective January 31,

2015, MIMCO and DFA mutually agreed to terminate the DFA
Agreements as a result of the fire because MIMCO was unable to
find a suitable replacement facility to enable MIMCO to
efficiently and fully perform the services to be provided to DFA
under the DFA Services Agreement.

As a result, MIMCO claims that

it incurred significant financial losses, including business
income loss and other expenses, totaling in excess of $9.7
million.
Previously, MIMCO purchased a package insurance policy, No.
Y-630-5076A285-TIA-13, from Defendant, Travelers Indemnity
Company of America (“Travelers”), for the policy period July 1,
2013, to July 1, 2014.

The Policy covers Business Income and

Extra Expense loss up to $16,167,000, and MIMCO claims that it
purchased coverage specifically to account for the DFA business
and paid a premium to extend the Policy coverage to include
losses resulting from damage to the Black Bear warehouse.

MIMCO

also purchased enhanced coverage that provided for 365 days of
Extended Business Income Coverage instead of the standard 180
days.
Within days of the fire at the Black Bear facility, MIMCO
tendered notice of an insurance claim for Business Income and
4

Extra Expense due to the fire.

Ultimately, Travelers paid MIMCO

$11.6 million under the Policy for Business Personal Property
(“BBP”), Business Income (“BI”) (approximately $3 million), and
Extra Expense (“EE”).

MIMCO claims, however, that Travelers

still owes it $7 million in BI coverage and for Extended Business
Income (“Extended BI”).

For Travelers’ refusal to fully

compensate MIMCO under the Policy, MIMCO seeks a declaratory
judgment that MIMCO is entitled to the additional $7 million
under the Policy, and it has asserted a claim for breach of
contract.
Both parties have moved for partial summary judgment. 1

The

heart of the instant dispute is the import of Black Bear not
rebuilding its facility and MIMCO ultimately ceasing operations
under the DFA contract.

In order to calculate the amount of the

insured loss under the BI provision, Travelers determined the
Period of Restoration (“POR”) under the policy, which Travelers
based on the reasonable time it would have taken Black Bear to
rebuild its facility - 23 months.

In contrast, MIMCO contends

that the proper method to determine the POR is based on its
unfulfilled contract term with DFA – 48 months plus an additional

1

According to Travelers, the issues that remain in dispute and
are not the subject of the summary judgment motions are whether
the DFA Contract’s shortfall fee should be included as income to
MIMCO, the proper application of a volume discount, MIMCO’s
revenue per pound for delivered product, and the variability of
certain expenses. (Docket No. 39 at 17 n.5.)
5

24 months – because Travelers’ use of a hypothetical restoration
over which MIMCO had no control is contrary to the law and the
Policy language.

MIMCO further contends that because the Black

Bear facility was never rebuilt and MIMCO never resumed its
operations, a hypothetical POR when there is no restoration is
not the appropriate guidepost for BI coverage.
The “no restoration” and “no resumption of business” issues
also affect MIMCO’s claim for Extended BI, should it not be
awarded full compensation under the BI provision.

Travelers

argues that MIMCO is not entitled to Extended BI because that
provision only provides coverage when an insured suffers certain
BI losses after actually repairing, replacing, or rebuilding the
damaged property, and then resuming operations, and MIMCO never
did any of those things.

MIMCO argues the that the Extended BI

provision is ambiguous, and therefore should be construed in its
favor to provide Extended BI to MIMCO.
MIMCO has moved for summary judgment in its favor on the POR
issue.

Travelers has moved for summary judgment in its favor on

the Extended BI issue.

Each party has opposed the other’s

motion.
DISCUSSION
A.

Subject matter jurisdiction

This Court has jurisdiction over the subject matter of this
action under the Declaratory Judgment Act, 28 U.S.C. § 2201, and
6

pursuant to 28 U.S.C. § 1332(a) because there is complete
diversity of citizenship between Plaintiff and Defendant, and the
amount in controversy exceeds $75,000.00, exclusive of interest,
attorneys’ fees, and costs.

Plaintiff is a citizen of

Pennsylvania and New Jersey, and Defendant is a citizen of
Connecticut.
B.

Standard for Summary Judgment

Summary judgment is appropriate where the Court is satisfied
that the materials in the record, including depositions,
documents, electronically stored information, affidavits or
declarations, stipulations, admissions, or interrogatory answers,
demonstrate that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a
matter of law.

Celotex Corp. v. Catrett, 477 U.S. 317, 330

(1986); Fed. R. Civ. P. 56(a).
An issue is “genuine” if it is supported by evidence such
that a reasonable jury could return a verdict in the nonmoving
party’s favor.
248 (1986).

Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

A fact is “material” if, under the governing

substantive law, a dispute about the fact might affect the
outcome of the suit.

Id.

In considering a motion for summary

judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence;
instead, the non-moving party's evidence “is to be believed and
7

all justifiable inferences are to be drawn in his favor.”

Marino

v. Industrial Crating Co., 358 F.3d 241, 247 (3d Cir.
2004)(quoting Anderson, 477 U.S. at 255).
Initially, the moving party has the burden of demonstrating
the absence of a genuine issue of material fact.
v. Catrett, 477 U.S. 317, 323 (1986).

Celotex Corp.

Once the moving party has

met this burden, the nonmoving party must identify, by affidavits
or otherwise, specific facts showing that there is a genuine
issue for trial.

Id.

Thus, to withstand a properly supported

motion for summary judgment, the nonmoving party must identify
specific facts and affirmative evidence that contradict those
offered by the moving party.

Anderson, 477 U.S. at 256-57.

A

party opposing summary judgment must do more than just rest upon
mere allegations, general denials, or vague statements.

Saldana

v. Kmart Corp., 260 F.3d 228, 232 (3d Cir. 2001).
C.

Analysis
1.

MIMCO’s motion for summary judgment

As with any insurance coverage dispute, the starting point
of the analysis is the language of the Policy.

The provisions

relevant to MIMCO’s motion provide:
A. COVERAGE
We will pay for:
•

The actual loss of Business Income you [MIMCO] sustain due
to the necessary “suspension” of your “operations” during
the “period of restoration”; and
8

•

The actual Extra Expense you incur during the “period of
restoration”;
caused by direct physical loss of or damage to property at
premises which are described in the Declarations and for
which a Business Income and Extra Expense Limit of
Insurance is shown in the Declarations. The loss or
damage must be caused by or result from a Covered Cause of
Loss. . . . if you occupy only part of the site at which
the described premises are located, your premises means:

•

The portion of the building which you rent, lease or
occupy; and

•

Any area within the building or on the site at which the
described premises are located if the area services, or is
used to gain access to, the described premises.

(Docket No. 1-1 at 62.)
“Period of Restoration”
a. [] means the period of time that:
(1) (a) For Business Income coverage, begins once the
number of hours of the applicable Business Income hour
deductible, if any, expires following the time of
direct physical loss or damage; . . .
caused by or resulting from a Covered Cause of Loss at
the described premises; and
(2) Ends on the earlier of:
(a) The date when the property at the described
premises should be repaired, rebuilt or replaced
with reasonable speed and similar quality; or
(b) The date when business is resumed at a new
permanent location.
(Docket No. 1-1 at 73.)
MIMCO contends that the POR is the duration of the
distribution business that MIMCO was to provide under the
9

agreement with DFA – 48 months for the remaining term of the
agreement after the date of the fire plus an additional 24 months
that constituted the automatic renewal period for the
distribution business.

MIMCO’s position is based on the fact

that MIMCO never resumed its business at a new permanent
location, and it had no legal ability to have “repaired, rebuilt
or replaced” the Black Bear warehouse and the services that were
provided by that warehouse.

MIMCO therefore contends that it is

wholly unreasonable to analyze the POR based on a hypothetical
rebuild or repair of the Black Bear warehouse when it did not,
and could not, rebuild, and it never resumed operations.
Travelers argues that the Policy language is clear and
unambiguous that the POR is the date when business resumed, or
based on an estimation of when the property “should be repaired,
rebuilt or replaced with reasonable speed and similar quality.”
Travelers argues that the Policy does not provide for a POR based
on MIMCO’s contract with DFA, as the Policy insured MIMCO’s
business operations at the Black Bear facility, and not MIMCO’s
contract with DFA.
A recent New Jersey Appellate Division case sets forth the
applicable standard for interpreting an insurance contract:
“The interpretation of an insurance contract is a
question of law . . . .” . . . . An insurance policy must
be read as a whole, Hardy ex rel. Dowdell v. Abdul-Matin,
198 N.J. 95, 103 (2009), and will be enforced as written
when its terms are clear, Mem'l Props., LLC v. Zurich Am.
10

Ins. Co., 210 N.J. 512, 525 (2012). “In assessing the
meaning of provisions in an insurance contract, courts first
look to the plain meaning of the language at issue.” Oxford
Realty Grp. Cedar v. Travelers Excess & Surplus Lines Co.,
229 N.J. 196, 207 (2017) (citing Chubb Custom Ins. Co. v.
Prudential Ins. Co. of Am., 195 N.J. 231, 238 (2008)). “If
the language is clear, that is the end of the inquiry.” “An
insurance policy is not ambiguous merely because two
conflicting interpretations of it are suggested by the
litigants.” “[C]ourts should not write for the insured a
better policy of insurance than the one purchased.” Boddy
v. Cigna Prop. & Cas. Cos., 334 N.J. Super. 649, 658 (App.
Div. 2000) (quoting Walker Rogge, Inc. v. Chelsea Title &
Guar. Co., 116 N.J. 517, 529 (1989)).
If a policy provision is ambiguous, we construe the
provision in favor of the insured, considering the insured's
reasonable expectations. Shotmeyer v. N.J. Realty Title
Ins. Co., 195 N.J. 72, 82 (2008). Language in a policy of
insurance is genuinely ambiguous when “the phrasing of the
policy is so confusing that the average policyholder cannot
make out the boundaries of coverage.” Weedo v. Stone-EBrick, Inc., 81 N.J. 233, 247 (1979). However, if a
provision is not ambiguous or otherwise misleading, we need
not consider the “objectively reasonable expectation” of the
average policyholder in interpreting the policy.
Barnes v. USAA Casualty Insurance Company, 2018 WL 2449134, at *1
(N.J. Super. App. Div. June 1, 2018) (some quotations and
citations omitted).
To support its view that the POR should be based on its
contractual term with DFA, and not on the estimation of when the
Black Bear facility “should be repaired, rebuilt or replaced with
reasonable speed and similar quality,” MIMCO relies upon
Streamline Capital, L.L.C. v. Hartford Cas. Ins. Co., 2003 WL
22004888 (S.D.N.Y. 2003).

In that case, Streamline occupied an

office suite in One World Trade Center during the terrorist

11

attacks of September 11, 2001.

Streamline filed a claim with

Hartford for business income losses.

Hartford determined that

the period of restoration ended on February 15, 2002, which would
have made it slightly more than five months long, but Streamline
argued the POR lasted twelve months plus thirty days - the
maximum time allowed in the policy - since the period could have
only been cut short by the rebuilding of One World Trade Center.
The court disagreed with Streamline.

Looking first to the

language of the policy, the court noted that the policy’s POR
“[e]nds on the date when the property at the described premises
should be repaired, rebuilt or replaced with reasonable speed and
similar quality.”

Streamline, 2003 WL 22004888, at *7.

Streamline argued that the term “property at the described
premises” meant the real and personal property at the World Trade
Center site, whether owned by Streamline or not, and that
consequently, the POR should have lasted until One World Trade
Center was rebuilt.

Id.

In contrast, Hartford argued that the

term meant property belonging to Streamline in Streamline’s
offices, and thus the POR concluded by the time Streamline should
have been able to reestablish its operations, either at the World
Trade Center site or in some other location.

Id.

The court found that construing the words “described
premises” to mean Streamline’s suite of offices in One World
Trade Center was a far more reasonable construction than taking
12

those words to mean either One World Trade Center or the World
Trade Center site as a whole.

Id. at *8.

The court came to that

conclusion because: (1) the policy provided coverage for “direct
physical loss of or damage to Covered Property at the premises
described in the Declarations,” (2) the Declarations described an
office suite, and (3) the term “premises” in the coverage
provision, which applied to “Covered Property at the premises
described in the Declarations,” was clearly an office suite.

Id.

The court found that in the absence of any evidence to the
contrary, the term “premises” had the same meaning in the POR
provision.

Id.

The court explained, “That the business income coverage only
applies to the suspension of the plaintiff's ‘operations’
indicates that it is dependent only on replacing what is
necessary to resume those operations - namely, the plaintiff's
personal property [computers, desks, chairs, etc.], not a
specific office at a specific location.”

Id.

The court further

explained that because the Declarations declared no buildings to
be covered by the Policy, the Covered Property amounted to
Streamline’s personal property kept at its office suite.

Id.

The court noted that the cases relied upon Streamline to
support its position concerned insurance for businesses conducted
at factories, processing plants, or other places where
significant machinery is employed.
13

Id. at *10.

The court

distinguished those cases, observing that none of Streamline’s
cases contained language that referred to “property at the
described premises,” where the only reasonable construction of
“premises” is an office suite.

Id.

The court further observed

that “[s]uch operations are less easily transferrable, and thus
tying the period of restoration in such cases to the time
necessary to rebuild at the original site is more reasonable.”
Id.

The court therefore denied Streamline’s request for judgment

that the POR lasted for twelve months plus thirty days (the
maximum period) under the policy.

Id.

Despite MIMCO’s reliance on Streamline, this Court finds
Streamline to actually support Travelers’ position.

Where in

Streamline the “property at the described premises” was
interpreted to mean the property – such as computers, desks and
chairs – in an office suite within One World Trade Center, “the
property at the described premises” in this case is indisputably
the Black Bear facility and DFA’s product MIMCO stored there.
(Docket No. 1-1 at 92, 97.)

While Streamline is similar to this

case because neither the World Trade Center nor Black Bear’s
facility was “repaired, rebuilt or replaced,” the Streamline
court expressly distinguished the case before it and other cases
like the one here, noting that tying the POR to the time
necessary to rebuild at the original site was more reasonable
when the “premises” was an entire facility in addition to the
14

property inside that facility.
MIMCO relies upon the Streamline court’s observation that
“[i]t is wholly unreasonable to think that the period of
restoration should be tied to the rebuilding of real property
over which neither the insured nor the insurer had any control. .
. . .”

Id. at *8.

That observation was made, however, in the

context of concluding that the “property at the described
premises” meant computers, desks and chairs in a suite of offices
in One World Trade Center rather than One World Trade Center as a
whole.

Moreover, the Streamline court continued the sentence

relied upon by MIMCO by saying where the POR should be tied to:
“the acquisition of replacement office space and the installation
of the plaintiff's personal property in that space,” which was a
process that Streamline controlled. 2

Id.

If this Court were to

follow that reasoning, the POR in this case should be tied to
MIMCO’s efforts to resume its operation at a different facility.
In any event, Streamline does not support MIMCO’s argument that
the POR should be tied to the duration of its contract with DFA.
Here, the Policy’s POR provision is not ambiguous.

2

It

The entire passage reads: “It is wholly unreasonable to think
that the period of restoration should be tied to the rebuilding
of real property over which neither the insured nor the insurer
had any control, instead of tying it to a process that the
plaintiff controlled: the acquisition of replacement office space
and the installation of the plaintiff's personal property in that
space.” Streamline, 2003 WL 22004888 at *8.
15

explicitly provides that the POR is “[t]he date when the property
at the described premises should be repaired, rebuilt or replaced
with reasonable speed and similar quality;” or
“[t]he date when business is resumed at a new permanent
location.”

Because MIMCO never resumed operations at a new

permanent location, the POR is based on when the “property at the
described premises” – i.e., the Black Bear facility - “should be”
rebuilt.

That the Black Bear facility was never rebuilt, which

was out of MIMCO’s control, and MIMCO ultimately ceased its
services for DFA because it could not secure a comparable
facility to Black Bear’s, does not render void the POR provision
for BI coverage.

Indeed, the type of insurance at issue – for

lost business income during a “suspension” of operations

–

contemplates that business will resume, rather than cease
altogether.

Even in the case where the business does cease

altogether, the calculation of business income loss must be based
on what the Policy says it will: the date when the repairs or
rebuilding should have reasonably been completed.
Although relevant to the amount of business income loss
MIMCO suffered, the duration of MIMCO’s contract with DFA is
irrelevant to the POR analysis.

For example, if MIMCO’s contract

with DFA expired 12 months after the fire, the POR based on when
the property “should be repaired, rebuilt or replaced with
reasonable speed and similar quality” would still govern.
16

Moreover, the end date for BI cannot be based on a contract MIMCO
entered into with a third party because it could have possibly
continued in perpetuity.

That the remainder of MIMCO’s contract

with DFA at the time of the fire was 48 months, with a 24-month
renewal, is beside the point.
The Court’s inquiry ends when an insurance policy’s
provision is clear, and a court should not “engage in a strained
construction to support the imposition of liability or write a
better policy for the insured than the one purchased.”

Oxford

Realty Group Cedar v. Travelers Excess and Surplus Lines Company,
160 A.3d 1263, 1270 (N.J. 2017) (citations omitted).

The inquiry

into how the POR should be calculated begins and ends with the
Policy because its language on that issue is clear.

The POR is

based on “[t]he date when the property at the described premises
should be repaired, rebuilt or replaced with reasonable speed and
similar quality,” not on the duration of MIMCO’s contract with
DFA.
Although the inquiry into how the POR is calculated is
settled, the inquiry into the actual calculation is not.

In

MIMCO’s pre-suit demand to Travelers in April 2015, MIMCO
submitted a report by a public adjuster that calculated the POR
to be 35 months based on the time it would take the Black Bear
warehouse to be replaced with a similar facility.
37-10.)

(Docket No.

Travelers has determined the POR based on an assessment
17

that the Black Bear warehouse should have been replaced with a
comparable facility in 23 months.

Travelers contends that its

calculation is undisputed, presumably because MIMCO’s summary
judgment focuses on the POR being based on the duration of the
DFA contract rather than the hypothetical rebuild calculation.
Travelers, however, has not cross-moved for summary judgment on
this issue. 3

In order to grant summary judgment to a nonmovant,

the Court must first give notice to the other party and provide a
reasonable time to respond.

See Fed. R. Civ. P. 56(f).

Thus,

the Court will deny MIMCO’s motion for summary judgment, and
provide leave to Travelers to move for summary judgment on the BI
calculation if it believes it has a valid basis to do so.

Cf.

NN&R, Inc. v. One Beacon Ins. Group, 2006 WL 1765077, at *7
(D.N.J. 2006) (denying summary judgment on the adequacy of the
insurance company’s payments for business interruption losses
because the parties had submitted proofs disputing the
appropriate period of restoration).
2.

Travelers’ motion for summary judgment

In addition to BI, the Policy provides for Extended BI.
e. Extended Business Income
(1)

Business Income Other Than “Rental Value”

3

Travelers filed a separate motion for summary judgment on the
Extended BI issue. It did not affirmatively move for summary
judgment in its favor on the BI issue.
18

If the necessary “suspension” of your
“operations” produces a Business Income loss
payable under this Coverage Part, we will pay for
the actual loss of Business Income you incur
during the period that:
(a) Begins on the date property (except
“finished stock”) is actually repaired, rebuilt
or replaced and “operations” are resumed; and
(b) Ends on the earlier of:
(i) The date you could restore your
“operations”, with reasonable speed, to the
level which would generate the Business
Income amount that would have existed if no
direct physical loss or damaged had
occurred; or
(ii) 180 consecutive days after the date
determined in (1)(a) above, unless otherwise
stated in the Declarations or by
Endorsement.
(Docket No. 1-1 at 64.)

An endorsement to the Policy extends the

Extended BI from 180 days to 365 days.

(Docket No. 1-1 at 17.)

Travelers argues that the Extended BI provision only
applies when the premises is actually repaired, rebuilt or
replaced and “operations” are resumed.

Because the Black Bear

facility was never actually replaced, and MIMCO never resumed
operations there, Travelers contends that the Extended BI
provision is not applicable.

Travelers further argues that the

purpose of Extended BI is to provide coverage to an insured
during the time period after the property has been restored and
the insured essentially gets back on its feet and resumes
operations at the level it was operating before the loss.
19

MIMCO counters that the Policy expressly addresses the
situation where MIMCO could not restore its operations, and
demands that Extended BI be paid in this case.

MIMCO also

argues that Travelers’ position is contrary to MIMCO’s
reasonable expectations because it paid a higher premium for
expanded and extended coverage, and it is incongruous that MIMCO
is entitled to less coverage because the loss was so severe.
To support its argument, MIMCO points to a provision in the
Policy which states, “If you do not resume ‘operations’, or do
not resume ‘operations’ as quickly as possible, we will pay
based on the length of time it would have taken to resume
‘operations’ as quickly as possible.”

MIMCO argues that because

this provision recognizes that the insured may not resume
operations, the Extended BI provision must be interpreted to
provide coverage for when MIMCO was unable to restore operations
based on the hypothetical time it “would have resumed
operations,” or 365 days. 4
As with the interpretation of the BI provision, the Court
must first look to the language of the Policy to determine

4

MIMCO briefly addresses the Extended BI issue in its motion for
summary judgment on the BI issue, and argues that if the Court
agrees with its position that the POR is 48 months based on its
contract and not the hypothetical rebuild date, the issue of
Extended BI would be moot. Because the Court does not agree with
MIMCO on that issue, the Extended BI issue is ripe for
consideration.
20

whether there is any ambiguity in the Extended BI provision.
The Court finds none.

It is clear that payment of Extended BI

has two explicit conditions: (1) it begins “on the date [the]
property . . . is actually repaired, rebuilt or replaced and
‘operations’ are resumed,” and (2) ends on the date MIMCO could
restore its operations to the pre-fire level or 365 days later,
whichever comes first.

MIMCO did not meet the first condition,

because the property was not actually repaired and MIMCO did not
resume operations.

Thus, under the plain language of the

Policy, MIMCO is not entitled to Extended BI.
MIMCO’s arguments to refute this interpretation are not
persuasive.

First, with regard to the provision that recognizes

the insured’s inability to resume operations, that language is
not found in the Extended BI section, but rather in a section
for “Loss Determination,” which concerns how business income
loss and extra expense will be determined based on the time and
nature of the insured’s resumption of operations.
1-1 at 71-72.)

(Docket No.

The “Loss Determination” provision also contains

a subsection for “Resumption of Operations.”

That subsection

provides that Travelers:
[W]ill reduce the amount of [MIMCO’s]:
(1) Business Income loss, other than Extra Expense, to
the extent you can resume your “operations” in whole
or in part, by using damaged or undamaged property
(including merchandise or “stock”) at the described
premises or elsewhere and, with respect to the
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Business Income From Dependent Property Additional
Coverage, by using any other available source of
materials or outlet for your products.
(2) Extra Expense loss to the extent you can return
“operations” to normal and discontinue such Extra
Expense.
(Docket No. 1-1 at 71.)
The “Loss Determination” section then continues:
If you do not resume "operations", or do not resume
"operations" as quickly as possible, we will pay based on
the length of time it would have taken to resume
"operations" as quickly as possible.
(Id. 1-1 at 72.)
Despite MIMCO’s reliance on this provision to support its
entitlement to Extended BI, it is evident that the Policy’s
acknowledgement of a situation where the insured does not resume
operations is explicitly in the context of determining the
amount of business income loss and extra expense owed to the
insured.

This provision is relevant to MIMCO’s claim for BI and

Extra Expense, but the language cited by MIMCO cannot be
imported into a separate provision unrelated to the provision’s
subject matter – i.e., the Loss Determination provision only
concerns BI and Extra Expense, and not Extended BI.
Additionally, if the Extended BI provision were interpreted
as MIMCO argues, Extended BI would simply be duplicative of BI.
Where the BI provision concerns an estimation of when the
covered property should be restored, and the Loss Determination

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provision concerns the estimation of the time it would have
taken for the insured to resume operations as quickly as
possible, the Extended BI provision does not rely upon
estimations, but rather when the property is actually repaired,
rebuilt or replaced, and when operations are resumed.

This

difference between “would have” and “should have” in the BI
provision and “actually did” in the Extended BI provision
comports with the purpose of Extended BI, which “is to provide a
cushion for the time after the ‘Period of Restoration’ when the
insured is back in business but still not doing business at the
same volume as before.”

Shaw Mortg. Corp. v. Peerless Ins. Co.,

615 F. Supp. 2d 1172, 1177 (S.D. Cal. 2009) (further explaining
that “there would be no need for Extended Business Income
coverage if the Policy generally provided for business income
loss payments until the restoration of operations to a normal
level”).
The Court is not unsympathetic to MIMCO’s observation that
it is ultimately entitled to less coverage for a more severe
loss over which it had no control.

Perhaps there is insurance

to cover the total cessation of business or a contract that
cannot be fulfilled, but that is not what the Travelers’ Policy
provides to MIMCO.

The Policy affords BI based on a period of

restoration from the date MIMCO suspended operations until
“[t]he date when the property at the described premises should
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be repaired, rebuilt or replaced with reasonable speed and
similar quality.”

The Policy affords Extended BI from “the date

[the] property . . . is actually repaired, rebuilt or replaced
and ‘operations’ are resumed,” until MIMCO restores its
operations to the pre-fire level or 365 days later.

The POR

based on an estimation of rebuilding governs the amount of BI
MIMCO is entitled to, and the circumstances of MIMCO’s loss do
not meet the requirements for Extended BI.

Consequently,

Travelers’ motion for summary judgment on MIMCO’s claim for
Extended BI coverage must be granted.
CONCLUSION
For the reasons expressed above, MIMCO’s motion for partial
summary judgment must be denied.

Travelers may move for summary

judgment on MIMCO’s claim for BI should it determine it is
appropriate to do so.

Travelers’ motion for partial summary

judgment on MIMCO’s claim for Extended BI must be granted.
An appropriate Order will be entered.

Date: August 30, 2018
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

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