Restoration periods in New York/New Jersey post Superstorm Sandy

Many businesses affected by Superstorm Sandy are now facing the reality of filing business interruption claims due to damage sustained during the storm.   Some of these claimants may find themselves struggling to repair damaged infrastructure that is essential to their business and are seeking out assistance from their insurer.  These claimants will likely be told that their policies only cover business interruption losses during the ‘period of restoration’ which is usually defined to begin 72 hours after the “direct physical loss” occurs and to end on the earlier of “the date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality” or “the date when business is resumed at a new permanent location”.  However, some policy forms limited the restoration period to “such length of time as would be required with the exercise of due diligence and dispatch to rebuild, repair, or replace such part of the property herein as has been damaged or destroyed” e.g. BA Properties, Inc. v. Aetna Cas. & Sur. Co., 273 F.Supp.2d 673 (D.V.I. 2003).  Other policy forms define the restoration period to include the period of time necessary for the business to achieve revenues at the same level at which it operated prior to the loss” e.g. Gus Meat Co., Inc. v. Hartford Steam Boiler Insp. and Ins. Co., 1992 WL 107313 (N.D. Ill. 1992).   So what we see here are a few  differing views from the courts as to how the period of restoration is defined in property insurance policies.  Judge’s rulings in previous business interruption claims for the NY/NJ area have shown that the courts definition of the length of time for a period of restoration may be effected by “real world circumstances” which are beyond the insureds control.  Essentially what we’ve seen is the lengthening of the period of restoration for the insured in light of the events surrounding and/or causing the damage sustained by the claimant.  The courts have even been seen to disregard insurers rigid restoration period structures due to the additional time needed to modernize or improve a structure during rebuild citing extra time needed for innovative design via an architect’s services E.g. Anchor Toy Corp v American Eagle Fire Insurance.   These outcomes clearly point to expert policy review and interpretation for the policyholder (whether pre or post loss) as essential in order to fully recover that which one is entitled to via their policies.