South-Western Legal Studies in Business

Loss of Business Income Must Be Caused Directly by Factors Stated in Policy
Description Appeals court held that a hotel chain was not due business income loss for the loss of customers who could not travel by air after the 9/11 attacks. The government did not order the hotels to close; it temporarily closed aviation.
Topic Insurance
Key Words Business Income Losses; Causation; Aviation; 9/11
C A S E   S U M M A R Y
Facts Hotels managed by Southern Hospitality lost business due to the cancellation of many flights following the terrorist attacks of 9/11. Southern filed a claim with Zurich American Insurance seeking coverage for its business income losses. Zurich refused to pay, contending the losses were not covered by the policy. Southern sued, but the trial court held for Zurich. Southern appealed.
Decision

Affirmed. The policy covers loss of business income "caused by action of civil authority that prohibits access to the described premises." The plain and ordinary meaning of words is used when interpreting terms in insurance policies. The government's order shutting down the airline industry is the action of a civil authority. However, the government did not "prohibit access" to the hotels. They remained open and customers could use the hotels, but not those who had planned to travel by air.

Citation Southern Hospitality, Inc. v. Zurich American Insurance Co., 393 F.3d 1137 (10th Cir., 2004)

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