In Comprehensive Medical Center, Inc. v. State Farm Mutual Automobile Insurance Company, 2025 WL 416814 (9th Cir. 2025), the Ninth Circuit Court of Appeals affirmed the district court’s determination that the period of restoration tied to water damage at the insured’s commercial property was the theoretical period when repairs should have been completed with reasonable speed, not the actual period of repairs thwarted by extraneous delays.
Facts
The insured’s claim arose after multiple water leaks damaged its office. The insurer initially paid a certain sum for lost income due to the leaks. However, the insured sought additional benefits, leading to a dispute over the total amount owed. The district court ordered an appraisal to determine the amount of income lost by the insured for a period following the initial leak. The appraisal panel’s decision was confirmed by the district court, which granted summary judgment to the insurer, concluding that the insurer did not owe additional benefits.
Analysis
On appeal, the Ninth Circuit’s analysis focused on the scope and extent of the period of restoration, which the policy defined as “[t]he date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality.” (emphasis added). In consideration of that definition, the court affirmed, emphasizing that the period of restoration was the period when repairs should have been completed with reasonable speed, without consideration of additional causes for delay. Specifically, the court rejected the insured’s argument that the period of restoration should have incorporated the time needed to repair areas not part of the “described premises” or delays caused by non-covered causes of loss, such as the actions or inactions of third parties (including the landlord and property manager).
Conclusion
Calculating an accurate period of restoration is critical in adjusting insurance claims. As demonstrated in Comprehensive Medical Center, that period must reflect the theoretical timeframe for completing repairs with reasonable speed, rather than the actual time period that encompasses delays that would not otherwise be afforded coverage. Engaging building consultants, engineers, accountants, or other types of professionals early in the claim is essential to help accurately capture the appropriate timeline.
