131_C192

CONSEQUENTIAL LOSS DENIED UNDER DIRECT LOSS SCHEDULED PROPERTY

Consequential loss	Direct loss
Blanket property	Output policy

Adorable Coat, Co. Inc., a manufacturer and importer of women’s apparel, was insured with Connecticut Indemnity Company on an all risk of direct physical loss basis under a manufacturers output policy. Coverage provided was $125,000 at any one scheduled location. An endorsement was attached to the policy providing consequential loss of value coverage resulting from a direct damage loss that had no separate limit but any loss was to be combined with the direct damage loss with the sum of the two to not exceed the policy limit.

The policy also included an endorsement increasing the limit to $1,000,000 for only two of the specified locations: 85 Tenth Avenue and 512 Seventh Avenue in New York. The list of coverages that were subject to the $1,000,000 limit were blanket contents, loss of income, additional expense, valuable papers and records and EDP equipment but not the consequential damage.

On February 21, 1985 a fire occurred at the scheduled Van Brunt warehouse damaging 16,000 jackets; the jackets were part of a 30,000 unit-lot. The remaining 14,000 coats at the time of loss were stored at the 85 Tenth Ave, New York location. A claim was filed with Connecticut Indemnity and the limit for direct damage of $125,000 was paid, less the deductible. Because the remaining parts of the entire lot sustained a significant loss of value, Adorable Coat filed a claim for an additional $231,474.85 in consequential damage.

Connecticut Indemnity denied the claim because the limit of insurance that was available at the scheduled location that had sustained the direct damage had been exhausted. An agreement was not attainable; therefore, both parties requested summary judgment. The court held for Connecticut Indemnity, affirming that the limits of liability for all coverages were applicable by location. The court affirmed that the consequential coverage was available at the Van Brunt warehouse but that all available limits for the Van Brunt warehouse had been paid for the direct loss. On appeal, the decision was upheld and the complaint dismissed.

Adorable Coat Co., Inc. v. The Connecticut Indemnity Company, Appellate Division of the Supreme Court of New York, First Department.157 A.D.2d 366 May 31, 1990.