Coverage Quiz (Q4 2022)


By Al Haverkamp of Lucas & Haverkamp

1Tools & Thangs (“T&T”) is a second-hand store in Bakersfield. T&T was burglarized on February 10, 2017, but the store owner did not discover the burglary until February 14, 2017. The burglars stole significant inventory and the store’s computers and also caused significant physical damage to the store. T&T claimed the store had to close for a period of time as a result of the burglary. T&T had a property insurance policy with Geico which included business interruption coverage. T&T submitted a business interruption claim to Geico, but Geico denied coverage for two reasons. First, Geico obtained T&T’s bank statements which showed that deposits increased after the burglary. According to Geico this showed there was no complete “suspension” of the store’s operations as required by CA law (CA law does require a complete suspension of operations). Second, Geico noted the policy only provided coverage for a “period of restoration” which had to be longer than 72 hours. Geico asserted the store should have been able to re-start operations within a few hours, thus there wasn’t a long enough “period of restoration.” Is there coverage?
Yes. First, to determine whether T&T’s operations were “suspended,” the court had to consider only the insured premises (the store), per the policy. Although Geico pointed to the bank statements to show operations continued, there was no evidence the deposits came from the insured location. The court stated it could not assume the money came from the store operating at the insured premises. Second, the court noted the burglary took place on February 10th but was not discovered until February 14th, more than 3 days after the event. The policy provided that the “period of restoration” began to run immediately after the loss, not when the loss was discovered. The court noted the repairs at the store could not have been completed within 72 hours after the burglary as they were not discovered until 4 days after the loss. See Brulee v Geico, 2018 US Dist. Lexis 121101