In White Mountain Communities Hospital, Inc. v. Hartford Casualty Insurance Company, the US District Court for the District of Arizona clarified the scope of the business income loss coverage provision in White Mountain's property insurance policy (No. 3:13-cv-8194, (D. Ariz. Apr. 17, 2015)). The court held that the clause protects against business income loss directly caused by physical property damage, not general business income loss that is indirectly occasioned by the casualty.

Hartford Casualty Insurance Company issued a commercial property insurance policy to White Mountain Communities Hospital covering the period from April 1, 2011 to April 1, 2012. The policy included a business income coverage provision that protected against business income losses resulting from "direct physical loss of or direct physical damage to" the property.

In June 2011, a nearby wildfire led to the evacuation of Springville, Arizona, the town where the hospital was located in. Hartford paid White Mountain a total of $723,548 on the claims resulting from the fire, including $683,520 for business interruption through August 6, 2011, which was the date by which Hartford calculated the damage to the hospital could have reasonably been repaired. White Mountain claimed it suffered business income losses continuing into 2012 that Hartford refused to cover.

White Mountain filed suit against Hartford for breach of contract, contending that it was due more money on its loss of business claim. Hartford filed a motion for summary judgment to the US District Court for the District of Arizona.

The court held that White Mountain did not present any evidence that the smoke contamination from the fire caused any business income loss. In its decision, the court defined the extent of coverage afforded by a business income loss coverage provision, finding that it:

In other words, the provision only covers business income lost because of physical damage to a property, not loss due to the unfavorable business conditions created by casualty in general. In this case, there was no evidence that any part of the hospital was physically dysfunctional during repairs or that it lost patients because of the repairs.

Because of the lack of evidence of any business income loss caused from directly property damage, the court granted Hartford's motion for summary judgment.

This case is useful for property owners and in-house counsel to understand the limits of their property insurance policies. In the event of a wildfire or other unexpected event, the business loss coverage provision in a property insurance policy may not provide the anticipated level of protection.