Insured’s Income During Partially Resumed Operations Reduces Charges and Expenses Claim

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U.S. Court of Appeals for the Fifth Circuit

In Consolidated Companies, Inc. v. Lexington Ins. Co., ____ F.3d ___, 2010 WL 3223137 (5th Cir. (La.) Aug. 17, 2010), the U.S. Court of Appeals for the Fifth Circuit held that an insured’s income during “the period of restoration” must be used to reduce its charges and expenses claim.

Consolidated Companies owns a warehouse in Louisiana that was damaged by Hurricane Katrina. Within 10 days of the loss, Consolidated Companies was able to resume partial operations. The parties disagreed on the interpretation of the business interruption provision. Namely, whether the “charges and expenses” incurred during the loss should be reduced by income earned during partially resumed operations. The district court reduced the lost profits award based on the income earned, but did not agree that the “charges and expenses” award should be reduced. The court also awarded property damage and statutory penalties.

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