VERDICT AGAINST INSURANCE AGENT OVERTURNED WHEN PLAINTIFF’S COUNSEL PRESENTED SPECULATIVE CALCULATIONS OF LOST REVENUE AND FAILED TO TIE IT TO COVERED BUSINESS INTERRUPTION COVERAGE

In Smith-Reagan & Associates, Inc. v. Fort Ringgold Limited, et al, No. 04-13-608-CV (Tex.App.-San Antonio March 11, 2015), the San Antonio Court of Appeals reversed the trial court’s judgment and rendered a take-nothing judgment on Plaintiff’s $325,000 jury verdict against an insurance agent for failing to procure business interruption insurance from Highlands Insurance Company on Plaintiff’s hotel.  The hotel sustained extensive damage after a storm, and 43 of the 64 rooms were closed due to mold. Highlands paid the property damage claims, but rejected the lost income claim because there was no business interruption coverage.  Plaintiff sued the insurance agent for failure to procure business interruption coverage and misrepresenting that Highlands had provided such coverage.

On appeal, the Court of Appeals noted that the jury charge closely tracked Texas case law holding “[t]he measure of the liability for an [agent’s] failure to procure insurance is the amount that would have been due under the insurance policy [if] it had been obtained.”  Here, the Plaintiff “presented no evidence of how business interruption damages would have been calculated if the policy had been obtained…. [They] did not present, as such evidence, testimony about or a copy of a policy providing business interruption coverage during the relevant time period.”  Plaintiffs argued at trial their damages amounted to $1,175,796 based on the number of closed rooms multiplied by the rate and the number of days closed.  This amount would include operating expenses, but Plaintiff admitted “he did not know how much he would have been entitled to receive if the policy had included business interruption coverage.”  The Court of Appeals recognized the estimate of lost gross revenue was speculative since they were based on an assumed occupancy rate and because the amount of expenses for those closed rooms was not presented in the calculation. Moreover, the calculations were not tied to what would be recovered under a policy with business interruption coverage.  The Court of Appeals accordingly held the matter could not be remanded for a new trial on damages because “we cannot say some evidence exists to warrant a remand for a new trial on damages.”  The only evidence offered at trial was deemed speculative.