Business Interruption Insurance and the 'Cessation or Suspension' Rule

Commercial entities placing first-party insurance often seek to insure physical loss or damage to their property and the loss of earnings directly arising from that loss or damage. Insurance against such loss of earnings is typically addressed through a 'Business Interruption' provision that is intended, as some courts have said, ''to do for the business what the business would have done for itself had no loss occurred'' to the insured's property. <i>Protection Mutual Ins. Co. v. Mitsubishi Silicon Am. Corp.</i>, 992 P.2d 479, 481 (Or. Ct. App. 1999) (quoting <i>A&amp;S Corp. v. Centennial Ins. Corp.</i>, 242 F. Supp. 584, 589 (N.D. Ill. 1965). While insurance policy wording can vary, <i>see Protection Mutual</i>, 992 P.2d at 481, broker manuscript and insurer forms require that an insured peril cause physical loss or damage to insured property, creating a 'necessary interruption' or 'necessary suspension' of the business. Some claimants and commentators argue that this insurance applies to any downturn or slowdown in business following loss or damage, but it is well-settled in case law that there must be a complete cessation or suspension in order to qualify for business interruption coverage.

16 minute read October 30, 2006 at 03:25 PM

By

Kenneth W. Erickson And Bryan R. Diederich