POLIKOFF, LTD., AND ANOTHER v. NORTH BRITISH & MERCANTILE INSURANCE COMPANY, LTD.

(1936) 55 Ll.L.Rep. 279

KING'S BENCH DIVISION.

Before Mr. Justice Branson.

Fire insurance-Loss of profits-Method of ascertainment-"In adjusting a loss, account shall be taken of any variation in the insured's business or of any extraordinary or other circumstances of the business by addition to or deductions from the turnover output or other standard employed in the policy and in the event of the earnings of the business for the financial year immediately preceding the fire or other period specified in the policy being insufficient to fully meet the amount of standing charges relating to such period the insurance shall only apply to the extent to which the standing charges shall have been met by such earnings"-Policy providing indemnity against: "(a) Loss of profits sustained during the period of indemnity in consequence of the within-mentioned interruption or interference, but not exceeding the ascertained percentage of the sum by which the turnover of such period shall, in consequence of such interruption or interference, fall short of the estimated turnover. Provided that if any of the specified standing charges shall be reduced or cease to be paid or payable the amount of the loss shall be reduced accordingly. (b) Increase in the cost of working necessarily incurred by the insured in consequence of such interruption or interference to maintain during the period of indemnity a turnover not exceeding the estimated turnover; provided that if the total sum insured shall be less than the sum of the net profit which would have been earned and all standing charges (insured and otherwise) of the business which would have been incurred during the annual currency of the policy had the business not been interrupted or interfered with the amount payable shall be proportionately reduced. Provided that the total liability of the insurance in respect of (a) and (b) shall not exceed in consequence of any fire the sum which would be payable in respect of (a) if the business were entirely stopped by the fire during the period of indemnity nor in the aggregate in respect of all fires during any one period of insurance the sum insured, viz., £100,000" - Specified standing charges: "Interest on loans, bank overdrafts, debentures and mortgages; rent, rates and taxes; directors' and auditors' fees; salaries and commission to directors and permanent staff; wages to skilled employees; insurance premiums; legal, advertising and travelling expenses; printing and stationery, stamps and telegrams; telephones, electric lighting and heating, gas and water; repairs to premises, depreciation of such building, plant and machinery as was not destroyed by the fire; and general expenses not exceeding 5 per cent. of the total amount payable in respect of specified standing charges" - Dispatch wages and drivers' wages-Whether "salaries and commissions to directors and permanent staff"-Finding of learned arbitrator that turnover was abnormally increased by an intensive advertising campaign - Reduction of mortgage interest - Voluntary payments by claimants of moneys received under fire policies-Wages to skilled employees - Insurance premiums - Whether including contributions payable by claimants under National Health Insurance Acts-Claim under "General expenses of the business" for packing materials and machinery maintenance-General expenses kept as separate account-Claim disallowed by arbitrator-Income tax-"Depreciation on such building, plant and machinery as is not destroyed by fire" -Claim for compensation in respect of higher percentage of wages upon turnover after fire-Disallowed by arbitrator on ground that policy had already compensated claimants for loss of profit upon lost turnover.