## Facts

- Catlin Syndicate Ltd. (Catlin) issued Imperial Palace of Mississippi, Inc. (Imperial Palace) a commercial property policy that included business-interruption (time-element) coverage.
- The policy’s “Experience of the business” clause stated: in determining time-element loss, “due consideration shall be given to experience of the business before the loss and the probable experience thereafter had no loss occurred.”
- Hurricane Katrina severely damaged multiple Mississippi casinos, including Imperial Palace’s Biloxi casino, forcing Imperial Palace to shut down for several months.
- After repairs, Imperial Palace reopened while many nearby casinos remained closed, and Imperial Palace’s gaming revenue after reopening was substantially higher than its pre-Katrina revenue because customers had fewer alternatives.
- Imperial Palace submitted a claim asserting roughly $165 million in losses, including about $80 million in business-interruption loss; Catlin contended the overall loss was far lower and estimated business-interruption loss around $6.5 million.
- A central dispute was whether business-interruption loss should be measured using (a) a projection based on Imperial Palace’s pre-loss revenue trend in a hypothetical world where no covered loss occurred, or (b) a comparison that incorporated Imperial Palace’s higher post-reopening revenues, which reflected changed market conditions after the hurricane.
- Catlin filed a federal diversity action in the Southern District of Mississippi seeking declaratory relief on the proper measure of business-interruption loss; Imperial Palace asserted counterclaims.
- The district court granted Catlin partial summary judgment on the interpretation issue, indicating the case should proceed consistent with the Fifth Circuit’s earlier decision in *Finger Furniture Co. v. Commonwealth Insurance Co.*, which addressed materially similar policy language under Texas law.
- Imperial Palace pursued an interlocutory appeal, arguing *Finger Furniture* should not control and that the policy language was ambiguous under Mississippi law.

## Issues

1. Under Mississippi law, does the policy’s “experience of the business” clause unambiguously require business-interruption loss to be determined by projecting the insured’s probable results from its pre-loss experience in a no-loss scenario?
2. May the insured use actual post-reopening revenues—boosted by post-disaster reductions in competition—to measure “probable experience thereafter had no loss occurred” and increase the covered business-interruption loss?

## Decision

- The Fifth Circuit affirmed the district court’s interlocutory order granting Catlin partial summary judgment on the interpretation of the business-interruption provision.
- The court held the relevant policy language was unambiguous under Mississippi contract law.
- The court concluded that “probable experience thereafter had no loss occurred” refers to a hypothetical world without the covered loss and does not permit importing revenue changes caused by the catastrophe itself (such as windfall gains from competitors remaining closed).
- Although *Finger Furniture* applied Texas law, the Fifth Circuit determined Mississippi law was not materially different on this question and treated *Finger Furniture* as persuasive authority supporting the same reading of materially similar language.

## Legal Principles

- In a diversity case, a federal court applies the forum state’s contract-interpretation rules to insurance policies; unambiguous language is enforced as written.
- Contract language is not ambiguous merely because parties propose different readings; ambiguity requires a reasonable alternative meaning in the text.
- A business-interruption clause directing “due consideration” of pre-loss experience and “probable experience thereafter had no loss occurred” calls for a projection of what the insured would likely have earned if the covered loss had not happened, using the pre-loss business trajectory as the starting point.
- Business-interruption insurance is indemnity coverage aimed at restoring the insured to the financial position it would have occupied absent the covered physical damage; it does not insure against all economic effects of a catastrophe.
- Post-loss revenue spikes attributable to market disruptions caused by the catastrophe (including reduced competition) are not part of the insured’s “no-loss” probable experience and cannot be used to expand covered business-interruption loss under this policy language.

## Conclusion

The Fifth Circuit held that, under Mississippi law, the policy’s time-element provision unambiguously requires measuring Imperial Palace’s business-interruption loss by projecting results from its pre-Katrina performance in a hypothetical scenario where no covered loss occurred, and it rejected Imperial Palace’s effort to use post-reopening windfall revenues—driven by competitors’ continued closure after Katrina—to increase the amount recoverable.


Catlin Syndicate Ltd. v. Imperial Palace of Mississippi, Inc., 600 F.3d 511 (2010)