U.S. District Court holds that regular wages paid to employees after a loss do not come within extra expense coverage, but extra wages and benefits do

On July 9, 2015, water infiltrated the electrical system of Interstate Gourmet Coffee Roasters, Inc., knocking out all power.  The business was suspended for thirteen days.  During that time Interstate's employees "redirected their efforts" to restore regular business operations.  Hourly employees were paid their regular rate and overtime pay.  Salaried employees were given additional vacation time to make up for the weekends they worked.

Interstate submitted a claim to Phoenix Insurance Company, it's insurer.  The coverage under the policy included "the actual Extra Expense you incur during the 'period of restoration.'" The policy defined extra expense as "reasonable and necessary expenses . . . that you incur during the 'period of restoration' and that you would not have incurred if there had been no direct physical loss of or damage to property." 

Interstate sought reimbursement from Phoenix for employee compensation incurred ruing the suspension period.  Phoenix reimbursed Interstate for the overtime paid to hourly employees, but denied the rest of the claim.

In Interstate Gourmet Coffee Roasters, Inc. v. Travelers Indemnity Company, 2018 WL 3733937 (D. Mass.), the United States District Court for the District of Massachusetts held that the extra expense coverage does not provide coverage for payment of wages to employees whose normal schedules are disrupted or inconvenienced, except for hourly employees who work additional hours because of the loss and extra vacation time offered to salaried employees.