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George's Inc. v. Allianz Global Risks US Insurance Co.

March 9, 2010

GEORGE'S INC., APPELLEE,
v.
ALLIANZ GLOBAL RISKS US INSURANCE CO., APPELLANT.
GEORGE'S INC., APPELLANT,
v.
ALLIANZ GLOBAL RISKS US INSURANCE CO., APPELLEE.



Appeals from the United States District Court for the Western District of Arkansas.

The opinion of the court was delivered by: Wollman, Circuit Judge

Submitted: January 12, 2010

Before LOKEN, Chief Judge, JOHN R. GIBSON, and WOLLMAN, Circuit Judges.

George's Inc. brought this diversity lawsuit against its insurer, Allianz Global Risks US Insurance Co., arguing that Allianz failed to indemnify George's for business expenses and personal property losses as required under the terms of its insurance policy. The district court denied Allianz's motion for summary judgment on the contested business expenses and granted summary judgment for Allianz on George's personal property claims. Both parties appealed. Because we conclude that the policy unambiguously excludes coverage for both claimed losses, we reverse the district court's denial of summary judgment on the business expenses claim and affirm the grant of summary judgment on the personal property claim.

I.

George's, a poultry processing company with facilities in Cassville, Missouri, has both property insurance and business interruption insurance through Allianz. In January and March 2007, ice storms caused a break in electrical service to George's Cassville plant, which disrupted production and resulted in a loss of business income. The power outage also led to the premature deaths of a number of chickens that were stored in a holding shed before processing. George's filed a claim under the policy, and Allianz conceded liability for lost business income and extra expenses totaling $309,676, minus the deductible.

At issue in this appeal is George's claim for $154,984 of business expenses in the form of fixed labor and overhead costs, and $29,989 in personal property losses from the chickens that perished in its holding shed. According to George's, the labor and overhead costs are recoverable under the "extra expense" portion of the policy. George's undisputed accounting records show that as a result of the business disruption, its cost-per-pound of chicken increased from $.0457 per pound to $.0527-that is, the company produced less chicken relative to its fixed costs.

George's derived the figure of $154,984 by multiplying its increased cost-per-pound by the number of pounds that it produced during the coverage period. It argued that those costs were recoverable under the following provision:

EXTRA EXPENSE

1) Measurement of Loss:

The recoverable EXTRA EXPENSE loss will be the reasonable and necessary extra costs incurred by the Insured of the following during the PERIOD OF LIABILITY:

a) Extra expenses to temporarily continue as nearly normal as practicable the conduct of the Insured's business; and

b) Extra costs of temporarily using property or facilities of the Insured or others, less any value remaining at the end of the PERIOD OF LIABILITY for ...


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