Duane Reade, Inc. v. St. Paul Fire & Marine Insurance Company

Duane Reade, Inc. (Duane Reade) (plaintiff) operated a drugstore in the retail concourse of the World Trade Center (WTC). On September 11, 2001, Duane Reade’s drug store was destroyed along with the WTC. Duane Reade sought to collect for business interruption under an insurance policy it held with St. Paul Fire & Marine Insurance Company (St. Paul) (defendant). Coverage under the policy was limited to a defined restoration period. The restoration period encompassed the length of time, with due diligence, it would take for Duane Reade’s business to be restored to the condition it would have been in had no incident occurred. Duane Reade and St. Paul could not agree on what constituted the restoration period under the policy. Duane Reade sued St. Paul, seeking a declaratory judgment, to define the restoration period, and damages for breach of contract. St. Paul moved to dismiss all the claims. The United States District Court for the Southern District of New York dismissed Duane Reade’s breach-of-contract claim as premature but permitted the declaratory judgment claim to continue. After discovery was completed, both Duane Reade and St. Paul moved for summary judgment. St. Paul did not deny that the destruction of the drug store was covered under the policy. In May 2002, St. Paul paid $9,863,853 to Duane Reade for businesses-interruption losses. St. Paul based its calculation for this amount on the assumption that the replacement store would have been open within nine months. St. Paul disputed that it owed any additional money toward business interruption. St. Paul claimed that the restoration period expired when chain-wide sales reached pre-incident levels. Duane Reade claimed that the restoration period would expire when the WTC was rebuilt.