Not Feeling It: Court Nixes Claim for Feng Shui Fees and Finds No Bad Faith

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In Patel v. American Economy Ins. Co., — F. Supp. 2d. —, 2014 WL 1862211 (N.D. Cal. May 8, 2014), the U.S. District Court for the Northern District of California granted the insurer’s motion for partial summary judgment, finding no coverage for the fees of a feng shui consultant, rejecting business losses outside the specified period, and concluding there was no bad faith.

The insured dental office suffered smoke damage due to a fire in the basement of premises it occupied.  Among other expenses submitted to its property insurer was a bill for $50,000 from its feng shui consultant who provided advice with respect to crystal replacements, energy balance restoration, furniture placement, and the alignment of Qi forces.  The court held that such expenses did not constitute a “direct physical loss” covered by the policy as they did not involve damage to tangible, material objects.  Furthermore, there was no evidence these expenses were incurred to minimize the suspension of the business and to continue operations (as a covered “extra expense”).  The court held that the extra expense provision was not rendered vague simply because it did not specifically exclude feng shui costs from coverage.

The court also rejected the insured’s supplemental claim for lost business income when it had to shutter its business in 2014 due to additional repairs to the building relating to the original fire, which occurred five years earlier.  The insured argued that the policy covered twelve months’ worth of lost income, and because it initially claimed only one month of lost income immediately after the fire, it remained eligible for another eleven months of coverage.  The court rejected this argument as the business income coverage was limited to the defined “period of restoration,” subject to the requirement that lost income must be sustained within twelve consecutive months from the date of loss.  The court found that it made no difference that restoration work may have resumed outside this limiting period.

Lastly, the court rejected the claim that the insurer disregarded in bad faith the insured’s need to relocate in 2014, citing the absence of any underlying contractual obligation to cover the 2014 lost income.

 

 

Topics:  Bad Faith, Consultants, Fees, Summary Judgment

Published In: Business Torts Updates, Civil Procedure Updates, General Business Updates, Insurance Updates, Commercial Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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