Volcanic Ash Did Not Close the Business

Commercial Lines Property	Operations Not Suspended
Time Element	Business Interruption

A town and a motel, six miles from Mount St. Helens when it erupted, were covered with six inches of volcanic ash. The motel recovered the cost of cleaning the building and personal property under its property insurance but was denied payment for the loss of business it claimed was caused by the widespread effects of the eruption and the necessary cleanup of its premises.

During an ensuing lawsuit, the trial court, after hearing testimony on the motel's income trends, concluded that it experienced a partial income loss due to the ash and awarded it $11,500. The insurer appealed.

The loss of earnings form stated that "....this policy is extended to insure against loss of earnings resulting directly from necessary interruption of business caused by the perils insured against damaging or destroying....real or personal property....at the premises...."

The insured argued that the earnings insurance provided coverage because the motel sustained damage from the eruption. They stated that the quality of service declined during cleanup and that the number of motel guests decreased in the aftermath of the eruption.

The insurer stated that "any business interruption loss must directly result from damage to the motel." It argued that because the motel did not suspend operations after the eruption, the earnings insurance did not cover the loss.

The appeal court referenced numerous cases, cited by the insurer, where it was generally found that the purpose of business interruption insurance is to compensate for losses caused by the inability to use specific premises. Hotel Properties, Ltd. v. Heritage Insurance Company of America, 456 So. 2d 1249 (Fla. Dist. Ct. App. 1984), was persuasive. Therein, the court concluded that a motel "....did not suspend business activity following a restaurant fire; there was no interruption as required for earnings coverage."

The appellate court concluded that there was no business interruption loss in this case. The trial court's decision was reversed in favor of the insurance company and against the insured.

Keetch et al., Respondents v. Mutual Of Enumclaw Ins. Co., Appellant. Washington Court of Appeals, Division Three. No. 11414-7-III. June 25, 1992. 66 Wn. App. 208. CCH 993 Fire and Casualty Cases, Paragraph 4035.