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Distributor not entitled to compensation for spoiled beer: Court

Disney World

A beer distributor whose supply was spoiled when Walt Disney Co. refused delivery because of the pandemic shutdown cannot be compensated for business interruption losses under its insurance coverage, a federal district court ruled.

Walt Disney Co. unit Walt Disney Parks and Resorts US Inc. voluntarily closed on March 15 and subsequently refused to accept the beer from Orlando, Florida-based Harvest Moon Distributors, with whom it had a contract, according to Friday’s ruling by the U.S. District Court in Orlando in Harvest Moon Distributors Inc. v. Southern-Owners Insurance Co. The beer later spoiled, according to the ruling.

Harvest Moon sued its insurer, Lansing, Michigan-based Southern-Owners, after it refused to pay its claim for the spoiled beer. The court granted the insurer’s motion to dismiss the case.

The court agreed with Harvest Moon that the distributor had suffered a direct physical loss to its property, the beer.

However, while Harvest Moon’s policy covered the loss of income if its operations were suspended, it did not cover Disney’s suspended operations, the ruling said. 

“Specifically, there is no indication that Plaintiff was unable to purchase beer from its suppliers, sell beer to willing buyers or deliver beer to such buyers.

“There is no allegation that Disney is Plaintiff’s only buyer, and, therefore, Disney’s unwillingness or inability to purchase the beer effectively terminated all of Plaintiff’s business activities,” the ruling said.

“The Court cannot infer from the mere assertion that Plaintiff’s product spoiled that Plaintiff’s operations were suspended,” the court said in concluding that Harvest Moon failed “to allege enough factual matter to plead coverage for lost business income and extra expenses.”

The court also said that while Harvest argued the pandemic caused its losses, and pandemic events were not expressly excluded from coverage, the loss “arose from Disney’s act of refusing the beer, not from the pandemic. COVID-19 itself did not damage Plaintiff's beer.”

“Disney’s motivation for its decisions is irrelevant. The Policy explicitly excludes from coverage such business decisions by persons, groups, or organizations,” it said, in granting the insurer’s motion to dismiss the case.

Southern-Owners’ attorney had no comment, while Harvest Moon’s attorney did not respond to a request for comment.

More insurance and risk management news on the coronavirus crisis here.