## Facts

- Eastern Associated Coal Corporation operated the Joanne Mine in Pennsylvania and purchased a business-interruption policy from Aetna and other insurers through a broker.
- The policy covered loss of earnings from a shutdown using a “lost profits” formula (expected earnings minus actual earnings, adjusted by “unincurred expenses”) and included a clause reimbursing certain expenses incurred to reduce an otherwise covered loss.
- An underground fire shut the mine for about twelve months.
- Eastern had a long-term supply contract to provide metallurgical coal to Sharon Steel and, during the shutdown, bought higher-priced substitute coal from other sources to meet its contract obligations.
- The insurers paid amounts calculated under the lost-profits coverage but refused to reimburse substitute-coal purchases and related costs.
- A jury awarded Eastern $4,736,377. The district court granted JNOV reducing the award by $890,744 for insufficient proof supporting part of Eastern’s coal-valuation damages and entered judgment for $3,845,633, but denied JNOV on coverage for substitute-coal expenses.
- Eastern appealed the reduction; the insurers cross-appealed the denial of JNOV as to substitute-coal and related expenses.

## Issues

1. Whether the evidence was sufficient to sustain the jury’s award for a portion of claimed lost coal sales value during the shutdown.
2. Whether the business-interruption policy covered the cost of substitute coal and related expenses incurred to satisfy a customer supply contract, either under the lost-profits formula or under the policy’s loss-reduction clause.

## Decision

- The court affirmed the district court’s JNOV reduction of $890,744, holding the challenged coal-valuation component lacked sufficient evidentiary support.
- The court reversed the denial of JNOV on substitute-coal and related expenses, holding those costs were not covered as a matter of law under either the lost-profits formula or the loss-reduction clause.
- The result significantly reduced Eastern’s recovery to amounts within the policy’s earnings-loss structure and properly supported by the record.

## Legal Principles

- In a diversity case, federal courts apply state substantive law and interpret insurance contracts by predicting how the state’s highest court would rule.
- JNOV is proper when, even viewing the evidence favorably to the verdict winner, the record cannot support the verdict on a required evidentiary or legal element.
- Business-interruption coverage for “loss of earnings” is directed to earnings from the insured premises and the insured’s expected operations during the interruption period, not to all costs triggered by the shutdown.
- Expenses to obtain substitute goods from outside sources to satisfy customer obligations are not part of the insured premises’ operating cost structure contemplated by a lost-profits formula.
- A loss-reduction clause covers expenditures that directly reduce the covered earnings loss as measured by the policy, not broader commercial expenditures aimed at preserving goodwill or future business.
- Contra proferentem applies only when policy language is genuinely ambiguous; a court may reject jury-found coverage where the policy, read in context, is unambiguous.

## Conclusion

The Third Circuit upheld a JNOV reduction for speculative damages and held that a business-interruption policy did not reimburse substitute-coal purchases made to fulfill a supply contract because such costs neither fit the earnings-loss formula nor directly reduced the covered loss under the policy’s loss-reduction provision.


E. Associated Coal Corp. v. Aetna Cas. & Sur. Co., 632 F.2d 1068 (3d Cir. 1980)