§ 3.13 Business Interruption

• Library: Guide to South Carolina Liability and Property Insurance Law (SCBar) (2019 Ed.)

§ 3.13 Business Interruption

The Court of Appeals for the Fourth Circuit addressed the operation of business interruption coverage by applying South Carolina law in Prudential LMI Commercial Insurance Co. v. Colleton Enterprises⁸³ The court addressed whether the policy at issue afforded coverage for lost profits resulting from Hurricane Hugo's closure of its motel. The policy provided coverage in "Section A - Physical Damage to and Loss of Use of Motel Property, Section 1 - Description of Property Covered" as follows:

Coverage C - Earnings When the insurance in this policy covers earnings, such insurance shall cover the loss of earnings sustained, less operating costs which do not necessarily continue during the necessary interruption of business, caused directly by the insured perils in this Section of the policy resulting in loss or damage to real or personal property at the described locations during the term of this policy.
**** Definitions EARNINGS ARE DEFINED AS NET PROFIT PLUS EXPENSE, TAXES, INTEREST, RENTS AND ALL OTHER OPERATING EXPENSES EARNED BY THE BUSINESS.
In determining loss hereunder, due consideration shall be given to:

a. the earnings of the business before the date of damage or destruction and to the probable earnings thereafter, had no loss occurred. . . .⁸⁴

The motel sustained extensive damage and the insured made a claim for a number of issues, including lost earnings - expenses, tax, interest, and other operating expenses earned by the business in the amount of $194,308 and net profit (net lost earnings) in the amount of $192,254. The insurer paid all portions of the claim except for...