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Shaw Mortgage Corp. v. Peerless Insurance Co.

May 11, 2009

SHAW MORTGAGE CORPORATION DBA PATIOSOURCE & THE NATURAL TOUCH, A CALIFORNIA CORPORATION, PLAINTIFF,
v.
PEERLESS INSURANCE COMPANY, ET AL. DEFENDANTS.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

ORDER DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiff Shaw Mortgage Corporation dba Patiosource & The Natural Touch ("Plaintiff" or "Shaw Mortgage") and Defendant Peerless Insurance Company ("Defendant" or "Peerless") have filed cross-motions for partial summary judgment. For the reasons discussed below, Defendant's motion is DENIED and Plaintiff's motion is DENIED.

I. FACTUAL BACKGROUND

Since 1995, Steve and Jan Shaw (the "Shaws") have operated the Natural Touch and Patio Source as joint operations. In 2003, the Shaws opened a showroom for the stores in a rented retail space located at 9050 Kenamar Drive, San Diego, CA. The Natural Touch sells decorations such as silk trees, plants, floral designs, and seasonal decorations. The Natural Touch also engages in home design work. Patio Source showcases and sells high-end indoor and outdoor furniture and accessories. Both businesses are seasonal - Natural Touch has increased production and sales during the holiday and summer seasons, while Patio Source has increased sales in the spring and summer seasons.

On or about December 26, 2005, a fire completely destroyed the store and its contents. Soon after the fire, the Shaws opened a temporary store in an attempt to keep in business. The Shaws explain that even though they were able to work out of a temporary space, they suffered significant business losses due to the loss of, among other things, inventory, customer lists, marketing materials, and vendor contacts. The Shaws also explain that they were unable to fully participate in the buying seasons of spring and summer 2006 due to the lack of time, money and space, and the uncertainty regarding where and when the stores would be reopened.

The Shaws' landlord rebuilt the destroyed building on Kenamar Drive, and The Patio Source & The Natural Touch re-occupied the building in or about September 2006. On September 10, 2006, the businesses had their grand reopening.

II. THE INSURANCE POLICY

In September 2005, Peerless issued an insurance policy, Policy No. CBP-9772033 (the "Policy"), to Plaintiff for the policy period of September 22, 2005 to September 22, 2006. (Ex. 1 to Amato Decl.)

A. Coverage

The Policy's Business Income (and Extra Expense) Coverage Form provides: "We will pay for the actual loss of Business Income you sustain due to the necessary 'suspension' of your 'operations' during the 'period of restoration.'" (Ex. 1 at Bates No. 00134.)

"Period of Restoration" is defined as the period of time that begins 72 hours after the time of direct physical loss or damage, and ends on the earlier of: "(1) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or (2) The date when business is resumed at a new permanent location." (Ex. 1 at Bates No. 00142.)

With respect to determining the amount of business income loss, the Policy provides:

c. We will reduce the amount of your:

(1) business income loss, other than Extra Expenses, to the extent you can resume your "operations" in whole or in part, by using damaged or undamaged property (including merchandise or stock) at the described premises or elsewhere. . . . .

d. If you do not resume "operations," or do not resume "operations" as quickly as possible, we will pay based on the length of time it would have taken to resume "operations" as quickly as possible. (Ex. 1 at Bates No. 00139.)

The Policy also provides coverage for "Extended Business Income": If the necessary "suspension" of your "operations" produces a Business Income loss payable under this policy, we will pay for the actual loss ...


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