Downstairs Cabaret, Inc. v. Wesco Insurance Co., 187 A.D.3d 1642 (4th Dep’t 2020)
This appeal concerned whether an insurance policy includes coverage for actual loss of business income when the declarations do not contain a limit for such loss, and whether an insurer is estopped from disclaiming coverage due to its earlier representation that coverage exists.
The underlying case arose out of a non-profit’s insurance claim for a business interruption loss following water damage to its building caused by a broken pipe. The insured, Downstairs Cabaret, had a policy through Wesco Insurance Company that included a separate business income coverage form. The policy’s schedule of forms noted that the business income coverage form was a part of the policy. Wesco initially attempted to settle the matter; however, in the process, it admitted in writing to Downstairs Cabaret that the policy provided business income coverage and that the loss would be adjusted and paid. The parties subsequently failed to agree on the amount of the loss.
In the litigation that followed, Wesco moved for summary judgment dismissing the claim for business income coverage because the policy did not have a limit for that coverage. The trial court denied the motion, finding, among other things, that the policy was ambiguous as to whether there was business income coverage, due to the fact that the policy contained a separate form for business income losses. Additionally, the court held there were issues of fact as to whether Wesco was estopped from denying coverage after previously admitting that business income was covered.
The Appellate Division, Fourth Department, reversed and held that the policy unambiguously did not provide coverage for business income loss because such coverage was contingent on a limit for that coverage being shown in the declarations. The appellate court also concluded that estoppel does not apply when the issue is coverage.
This decision is significant because it addresses the interpretation of a standard commercial insurance policy and whether business income loss coverage exists when the actual loss of business income is neither described nor limited by the policy declarations.