Opinion
C.A. No. 00C-05-034.
Date Submitted: January 13, 2002.
Date Decided: April 17, 2003.
Gary S. Nitsche, Esquire
Brian D. Shirey, Esquire
Dear Counsel:
This is the Court's decision after a one-day non-jury trial in this insurance coverage dispute between Nassau Gallery, Inc. (the "Gallery") and Nationwide Mutual Fire Insurance Company ("Nationwide"). The Gallery is awarded $1,145.00, plus interest and costs for the reasons stated herein.
FACTS
The Gallery and Nationwide dispute responsibility for $24,990.85 in reconstruction expenses related to a June 17, 1999, fire in a building rented by the Gallery. At the time of the fire, the Gallery had business owners' property coverage (the "Policy") with Nationwide. The Gallery contends Nationwide must pay the costs related to the Gallery's restoration because the disputed expenditures were Extra Expenses incurred by an insured expediting the resumption of business. The contested expenses are:
The Gallery contends the disputed expenditures were Extra Expenses incurred "[t]o avoid or minimize the suspension of business and to continue `operations'" or "[t]o repair and replace any property."
Lighting:
Tristate Electrical $5405.37 Shipping 259.65
Supplies:
Lowe's 1356.03 Atlantic Millwork (trim) 366.60
Labor:
Potts Construction (carpet and lighting) 2700.00 Oceanus (accommodations) 1350.88 Randy Richardson (drywall) 100.00 EA Associates (paint and trim) 1238.00 George Carey (painter) 325.00
Paint: Sherman Williams (paint) 29.90 Duron (paint) 97.05
This charge reflects the cost of accommodations for employees of Potts Construction.
Carpet and Installation:
Andersons (flooring) 8755.00 Zach Hart (carpet) 425.00 Mike Yerkes (tip) 50.00 Steve Sneller (tip) 50.00
Security System:
ADT 680.00
Assorted Expenses:
Printing and Reproduction 301.30 Mr. Copy (banner) 210.00 Advertising Special 770.00 Grand Rental Station (cleaner) 56.07
Garbage Removal:
John Brisco 150.00 John Brisco 275.00 John Brisco 40.00
Nationwide denies any responsibility for the contested expenses. Nationwide claims the expenses are losses to Covered Property and the Gallery has received compensation up to its Policy limit.
The Policy limit for Business Personal Property was $80,000, with a 25% seasonal adjustment that applied under the facts of this case.
DISCUSSION 1. Insurance Coverage
In a contract dispute, the court must "seek to determine contractual intent from the language of the insurance contract itself." E.I. du Pont de Nemours Co. v. Allstate Ins. Co., 686 A.2d 152, 156 (Del. 1996) (citation omitted). If the meaning of the contract is unequivocal, the parties are bound by the plain language contained therein. Woodward v. Farm Family Ins. Co., 796 A.2d 638, 641 (Del. 2002). The Court's interpretation "will be guided by `a reasonable reading of the plain language of the policy.'" du Pont v. Allstate, 686 A.2d at 156 (citing Aetna Cas. and Sur. Co. v. Kenner, 570 A.2d 1172 (Del.Super. 1990)). The existence of conflicting interpretations will not create a per se ambiguity in the contract. Id. A contract's language will be deemed ambiguous only if the disputed provision is "reasonably or fairly susceptible of different meanings or may have two or more different meanings." Rhone-Poulenc Basic Chem. Co. v. American Motorists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992).A. The Property Damage
The scope of an insurance policy's coverage is determined by the policy's language. Woodward, 796 A.2d at 641. The Gallery's Policy included coverage for Business Personal Property. Specifically, the contract provided:
A. COVERAGE
We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss . . .
b. Business Personal Property located in or on the buildings at the described premises . . . including:
(1) Property you own that is used in your business;
(3) Tenant's improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions:
(a) Made a part of the building or structure you occupy but do not own; and
(b) You acquired or made at your expense but cannot legally remove.
After the Gallery began its lease, carpeted partition walls with track lighting were added to the premises for the display of merchandise. Regardless of whether the Gallery's lease allows for the removal of these items, the lighting fixtures and carpet are Business Personal Property. Paint and trim are improvements that cannot be removed from the property after application. These items are Business Personal Property under Subsection 3. Thus, the supplies from Lowe's and Atlantic Millwork, the labor and material from E A Associates, Potts Construction and others, the paint, the carpet, and the lighting fall under Subsection 3 of the Business Personal Property Section. Even though these are losses to Business Personal Property, the Gallery will not receive compensation for these expenses because Nationwide has paid the Gallery up to the Policy's coverage limit.
If the lighting fixtures and carpet can be removed from the property under the lease's terms, they are property of the Gallery used in business and fall within Subsection 1. However, if the lease does not permit removal, the lighting fixtures and carpet are improvements or betterments made by the tenant to the property under Subsection 3b.
The Gallery has the burden of proving that a loss is covered by the relevant policy. Deakyne v. Selective Ins. Co. of America, 728 A.2d 569 (Del.Super. 1997). The Gallery has not shown whether the alarm system was a fixture installed by the tenant, removable property owned by the tenant, or a fixture owned by the landlord. Thus, the Gallery has failed to meet its burden of proving that the disputed ADT bill is a covered expense.
Even if the expenses discussed above were not losses to Covered Property, the Gallery would not prevail. The reconstruction-related expenditures the Gallery seeks compensation for are not valid Extra Expenses. Extra Expenses are the costs associated with "continu[ing] as nearly as practicable the normal conduct of the insured's business during the period of restoration following a direct loss by a named peril to buildings or contents used by the insured." Travelers Indem. Co. v. Pollard Friendly Ford Co., 512 S.W.2d 375, 377, 379 (Tex.Civ.App. 1974); see also Port Murray Dairy Co. v. Providence Washington Ins. Co., 145 A.2d 504 (N.J.Super.Ct.Ch.Div. 1958) (discussing the difference between extra expense coverage and primary coverage); Hartford Steam Boiler Inspection Ins. Co. v. Quantum Chem. Co., N.D. Ill., No. 91 C 6907, 1996 U.S. Dist. LEXIS 17551, Grady, J. (Nov. 19, 1996). The Policy states:
g. Extra Expense
[Nationwide] will pay necessary Extra Expense you incur during the `period of restoration' that you would not have incurred if there had been no direct physical loss or damage to property at the described premises . . . caused by or resulting from a Covered Cause of Loss. Extra Expense means expense incurred:
(1) To avoid or minimize the suspension of business and to continue `operations':
(a) At the described premises . . . (2) To minimize the suspension of business if you cannot continue `operations.'
(3)(a) To repair or replace any property . . . to the extent it reduces the amount of loss that otherwise would have been payable under this Additional Coverage or Additional Coverage f., Business Income . . .
A fire, such as occurred at the Gallery, is a recognized cause of loss under the Policy.
Subsections 1 and 2 of the Extra Expense clause compensate an insured for the cost of minimizing the "suspension of business" after a covered loss. The Policy's Extra Expense clause is found under the "Additional Coverages" heading. Contract interpretation requires that each term and provision in a contract "be interpreted in a way that does not render any provision illusory or meaningless." O'Brien v. Progressive N. Ins. Co., 785 A.2d 281, 287 (Del. 2001) (quoting Sonitrol Holding Co. v. Marceau Investissements, 607 A.2d 1177, 1183 (Del. 1992)). As with any contract, this Court's interpretation of the Extra Expense clause cannot create an "absurd" result. Thompson v. Threshermen's Mut. Ins. Co., 493 N.W.2d 734 (Wis.Ct.App. 1992). Additional Coverage protects an insured from specific losses, it is not a means to circumvent otherwise valid policy limitations. See Travelers Indem. Co. v. Pollard Friendly Ford, 512 S.W.2d 375; Thompson, 493 N.W.2d 734. Reconstruction expenditures, such as the Gallery's, are related to the Policy's primary coverage, not the Extra Expense provisions. See Thompson, 493 N.W.2d at 737 (lessee business owner cannot use extra expense coverage to rebuild rented store because neither party contemplated this use at the policy's inception). Nationwide is not responsible for the Gallery's failure to obtain adequate insurance coverage nor for those losses exceeding the Policy's primary coverage limit, including reconstruction expenses related to carpet, lighting, paint, and drywall. Thus, the Gallery's reconstruction expenditures are not compensable Extra Expenditures under either Subsection 1 or Subsection 2. A contrary finding would lead to the forbidden absurd result.
Under Subsection 3 of the Extra Expense clause, an insured may be compensated for the cost of repairing and replacing damaged property during the "period of restoration." According to another court examining a similar extra expense clause, the "coverage was not for the cost of rebuilding and restoring the physical structure on the premises, but primarily for securing extra facilities and for `necessary emergency expenses' of a concrete or practical nature." Travelers Indem. Co. v. Pollard Friendly Ford Co., 512 S.W.2d at 380. The Gallery's construction-related expenses relate to neither relocation nor exigent circumstances. Furthermore, Extra Expense coverage requires that the insured show that the "expenses exceed what it would have normally cost the [business owner] to conduct [his or her] business had no loss occurred." Irving v. St. Paul Fire Marine Ins. Co., Conn. Super. Ct., No. 529336, 1995 Conn. Super. LEXIS 1742, at *7, Hurley, J. (June 6, 1995). Specifically, Subsection 3 of the Policy provides that the expense must "reduce the amount of loss that otherwise would have been payable" to the Gallery as Additional Coverage. Thus, the Gallery would have had to show that the cost of operation during the restoration period exceeded normal operating expenses. See Id. The profit-loss statements offered into evidence do not sufficiently demonstrate an increased cost of operation after the fire. As the Gallery failed to show the relationship between the reconstruction expenses and the normal expenses or Business Income, the Gallery will not be compensated under Subsection 3.
In conclusion, Nationwide need not reimburse the Gallery for the disputed reconstruction expenses. These expenditures were losses to Covered Property, not valid Extra Expenses. Nationwide compensated the Gallery up to the Policy's coverage limit for this type of loss.
B. The Gallery's Other Claims
The Gallery should receive compensation for the cost of garbage removal by John Brisco ("Brisco"). Brisco removed rubbish and debris "caused by or resulting from a covered cause of loss," in this case the fire. This expense is compensable "Debris Removal" under the Policy's Additional Coverages provisions. Advertising expenses incurred to inform the public of the Gallery's post-fire status are valid Extra Expenses under Subsection 1. The Gallery used advertisements to inform the public that it remained open for business. This publicity was related to the normal conduct of business and allowed the Gallery to operate during its restoration period. See Travelers Indem. Co. v. Pollard Friendly Ford Co., 512 S.W.2d at 380; Hartford Steam Boiler at *47 (Extra expense coverage deals with the increased costs of doing business after a covered loss.). The Extra Expense clause does not include language expressly limiting the award; however, an unlimited award would lead to an absurd result. See generally Thompson, 493 N.W.2d at 737. The Gallery's advertising expenses, totaling $980.00, must be offset against the Gallery's 1998 advertising expenditures of $300.00. This creates a compensable difference of $680.00. Also, the Gallery seeks compensation for the cost of recording fire damage, an expense listed as "Printing and Reproduction." The Policy does not compensate the insured for this expense. Lastly, the Gallery has not proven the purpose of its expense at Grand Rental. The Gallery admitted the rental was for a floor cleaner, but the Gallery has not demonstrated that the expense is covered by the Policy. See Deakyne, 728 A.2d at 571. In total, the Gallery is entitled to compensation of $1,145.00.
Debris removal totals $465.
2. The Gallery's Attorney's Fees
Nationwide also claims that 18 Del. C. § 4102 violates the Equal Protection Clause of the federal and state constitutions. This Court will not explore this issue. See Brandywine Shoppe, Inc. v. State Farm Fire Cas. Co., 307 A.2d 806, 810-11 (Del.Super. 1973).
The Gallery seeks attorney's fees pursuant to 18 Del. C. § 4102. This section provides:
The court upon rendering judgment against any insurer upon any policy of property insurance, as `property' insurance is defined in section 904 of this title, shall allow the plaintiff a reasonable sum as attorney's fees to be taxed as part of the costs.18 Del. C. § 4102. When judgment is rendered against an insurer, the insured has a right to recover reasonable attorney's fees. The amount awarded lies within the discretion of the court. Heil v. Nationwide Mutual Insurance Co., 371 A.2d 1077, 1078 (Del. 1977); See State Farm Mut. Ins. Co. v. Sanders, Del. Super., No. 5166 Civ. A. 1977, Bifferato, J. (July 26, 1978) (upholding award of attorney's fees based on amount awarded to plaintiff). The award may be "minimal or nominal," depending on the circumstances of the case Id. The Gallery is entitled to an allowance for reasonable attorney's fees pursuant to 18 Del. C. § 4102. The Gallery should formalize its request for attorneys fees and confer with Nationwide and the Court to determine whether a hearing on the amount of fees to be awarded is necessary.
CONCLUSION
For the reasons stated above, the Gallery is awarded $1,145.00, plus interest and costs in this insurance coverage dispute. The Court postpones judgment on the award of attorney's fees.
IT IS SO ORDERED.