Opinion
Index 157328/2013
01-09-2022
Books for Less, LLC Plaintiff, v. United National Ins. Co. Defendant.
Unpublished Opinion
DECISION AFTER TRIAL
Melissa Crane, J.
Plaintiff Books for Less, LLC (Books) is in the business of purchasing books in lots and reselling them to wholesalers and others. The dispute between Books and United National Insurance Company (United), Books' insurer, arises out of a storm that occurred at plaintiff's warehouse on August 18, 2011 in New Jersey that destroyed inventory. Defendant United issued a Following Form Property Excess of Loss policy numbered LP000206, effective June 23, 2011 to June 23, 2012 to Books for Less, LLC. United's excess policy follows the form of the primary policy and therefore covers "the actual loss of Business Income you [the insured] sustain due to necessary 'suspension' of your operations during the period of restoration."
On August 14, 2017, the court (Friedman, J). issued a declaratory judgment that United's policy must cover the loss from the storm above the $500,000 limit of the primary policy, "subject to proof of the actual business income loss suffered." (see EDOC 120 pg 8). The Appellate Division affirmed (see Books for Less, LLC v. United Nat'l Ins. Co., 166 A.D.3d 567 [1st Dep't 2018] ["The plain language of the excess insurance policy issued by defendant unambiguously requires that defendant provide coverage for business interruption loss suffered by plaintiff in excess of $500,000"]). Thus, the purpose of the trial was to determine whether there was any proof of actual business income loss above $500,000 under the terms of the policy.
United's policy essentially provides business interruption coverage on an excess basis during the "period of restoration. Period of Restoration" means the period of time that
a. Begins:
(1)72 hours after the time of direct physical loss or damage for Business Income coverage; or
(2) Immediately after the time of direct physical loss or damage for Extra Expense coverage; caused by or resulting from any Covered Cause of Loss at the described premises; and
b. Ends on the earlier of:
1. The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality;
The parties sharply dispute the length of the "period of restoration." Plaintiff insists the period of restoration was 18 months. United claims it is six. The reason for this dispute is apparent. Only if the period is the extensive 18 months plaintiff advocates, do damages exceed $500,000 such that United's excess level would be reached. The following are the court's findings of fact and conclusions of law.
Mr Shmuely, the Plaintiff, testified first. The court's impression was that he was not particularly credible. Shmuely distanced himself when questioned about what books he had bought. He explained that the books come in on "gaylords," but are not itemized. Each "gaylord" contains perhaps hundreds of books. This begs the question: if you do not know what you have, how do you know what you lost?
In addition, despite seeking millions of dollars from its insurers, plaintiff failed to preserve evidence relating to "open undelivered orders" for August 2011, a critical time period considering the storm's date of August 18, 2011. As a result, the court issued an adverse inference that these records would contradict plaintiff's damage calculations for these orders (see EDOC 274).
Mr. Shmuely also testified that his business is seasonal. He makes most of his money at the beginning of each school semester, because of the need for textbooks. Therefore, the storm arrived at the worst possible time, right before the fall semester 2011. However, Mr. Shmuely never satisfactorily explained why he could not purchase more books for the following semester, or even the semester after that, especially as he had a $200,000 advance from his primary insurer to purchase more inventory.
Plaintiff referred to an "aging process" that takes 18 months, but never explains why, if publishers are constantly holding new books for 9-18-24 months, different "aged" books would not be available from the publishers on a constant basis, or at least constantly every six months. Schmuely testified that "Books For Less was unable to have the best product to sell textbooks until the January, February 2013 season." However, at no point in the trial did the plaintiff support this assertion. Instead, all plaintiff did was make a naked assertion that the books were not available. That plaintiff did not call someone from the publisher or even his insurance adjuster only reinforced the implausibility of plaintiff's assertion. At bottom, an 18-month restoration period makes no sense when new semesters occur every six months.
Plaintiff's expert did not support plaintiff's view about the "period of restoration." This is because Mr. Scott, plaintiff's expert, did not verify the cutoff date of 12/2012 as the end of plaintiff's period of restoration. Instead, he took plaintiff's position at face value that the restoration period was 18 months. Moreover, Mr. Scott's analysis relied on plaintiff's exhibit 6 which never made it into evidence, because plaintiff failed to call a witness who could authenticate it.
Finally, in order for Scott's analysis to have any validity, one would have to accept the basic premise that revenue generation is purely a function of the passage of time. This is obviously not true. And, even if it were, Scott's analysis takes too rosy a view. This is because it relies heavily on plaintiff's initial growth phase which eventually leveled off from the initial start up phase.
Meanwhile, defendant's expert, Ms. Mitchell credibly demonstrated that indeed Scott was using numbers that were too optimistic because they relied on older data. Ms. Mitchell pointed out that the growth percentage of Books for Less in the six months prior to the storm was essentially flat (see ex J pg 10, Table 4). Ms. Mitchell's calculations are also more accurate than Mr. Scott's because she additionally took into account increased payroll expenses and consequential loss for working capital. Accordingly, plaintiff has failed to prove actual loss of business income above the $500,000 threshold.
Therefore, it is
ADJUDGED, DECREED AND DECLARED that the United National Insurance Company's policy numbered LP000206, effective June 23, 2011 to June 23, 2012 to Books for Less, LLC has no coverage obligation with respect to the underlying claim due to losses not reaching the excess level.
The Clerk is directed to enter judgment for defendant and mark this case disposed.