Feng shui is a Chinese philosophical system that supposedly orients buildings and their contents in an auspicious manner. Last month in Patel v. American Economy Ins. Co., — F.Supp.2d —, 2014 WL 1862211 (N.D. Cal., May 8, 2014), however, a California court rejected the notion that it was compensable under a first-party property insurance policy as either a legitimate expense to repair direct physical loss or damage or a necessary extra expense to avoid additional business income loss.
On October 14, 2009, a fire filled the dental offices of Dr. Namrata Patel with smoke. Dental and electronic equipment was damaged, and she incurred costs for cleaning and repair, inventory replacement, and lost business income during a one-month closure after the blaze. Dr. Patel was insured by American Economic Insurance Company, and she made claim for her loss. The insurer paid portions of her claim, but it denied liability for other components, and the dentist subsequently brought suit in federal court in California, alleging breach of contract and bad faith.
One of the two principal bones of contention was a claim for over $50,000 for a feng shui consultant. Dr. Patel utilized feng shui when she initially opened her dental practice. Prior to reopening after the fire, she did so once again, and the claim included a “Five Elements Feng Shui Invoice” in the amount of $50,275. According to her affidavits, the feng shui consultant was retained “to come in and change crystals and perform additional cures to help to restore the location to its original condition,” to “restore energy balance,” and to determine “placement of furniture and dealing with forces of Qi.” The policy insured against “direct physical loss of or damage to Covered Property,” an0d Dr. Patel contended that the consultant’s services fit within that definition because she had used him when she had originally set the office up. She also sought to invoke coverage under the contract of insurance’s extra expense provision.
The Northern District of California was having none of it, and it granted American Economy’s motion for partial summary judgment and dismissed the feng shui claim. “Direct physical loss” was not defined in the policy, but Judge William H. Orrick’s opinion held that the word “physical” meant “of or relating to material nature, or to the phenomenal universe perceived by the senses; pertaining to or connected with matter; material [as] opposed to psychical, mental, spiritual” (emphasis by the court). He also noted that California courts had consistently limited direct physical loss to “damage to tangible, material objects.” Accordingly, the court held that the feng shui consultancy fees didn’t meet the plain meaning of the term. Judge Orrick also rejected Dr. Patel’s argument that the feng shui fees constituted a covered extra expense because he held that they were not “necessary” to avoid or minimize a suspension of business.
The court also granted partial summary judgment to the insurer with respect to: (1) a claim for anticipated future business income loss during a closure in 2013 – four years after the fire – to belatedly repair fire damage to the building’s air ducts; and (2) Dr. Patel’s claim for bad faith claims-handling.