The insured's motion for summary judgment was granted, paving the way for recovery for property loss and business interruption. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. TransCanada Energy USA, Inc., 2016 N.Y. Misc. LEXIS 1027 (N.Y. Sup. Ct. March 2, 2016). TransCanada purchased a power plant on August 26, 2008, for generating electricity for the New York metropolitan area. On September 12, 2008, excessive vibrations from Unit 30 required that the unit be shut down. On September 16, 2008, a crack in the unit's rotor was discovered. After repairs, the unit was placed back into service on May 18, 2009. A property policy and combined business interruption coverage was acquired by TransCanada when the plant was purchased. The policy period began August 26, 2008. On September 16, 2008, TransCanada sent a notice of loss, setting forth a gross earnings claim for business interruption losses consisting almost entirely of lost capacity payments from a loss of capacity sales. The insurers filed a declaratory judgment action. TransCanada argued there was a "mechanical breakdown," covered by the policy, that occurred after the policy took effect, that the breakdown was caused by the crack that expanded and caused property damage during the policy period, and that the breakdown constituted an event of physical loss. As a result of the breakdown, TransCanada suffered property damage in the amount of $7 million and a loss of gross earnings in the amount of $50.8 million. The insurers denied coverage on the ground that TransCanada's loss during the policy period was caused by the crack that formed before the policy commenced. The court determined it was irrelevant that the crack formed before the policy period. Moreover, the unit was functioning properly until September 12, 2008, despite the crack's pre-existence. The unit did not break down until it experienced the excessive vibrations that day. Therefore, there was no merit to the insurers' argument that the crack caused no damage beyond that which incurred before the policy's commencement. Consequently, the insurers failed to raise an issue of fact as to whether TransCanada's loss was covered under the policy. Turning to the business interruption claim, the insurers argued that the period of liability limited coverage for TransCanada's loss of capacity sales to the period between September 12, 2008 and May 18, 2009, as coverage was limited to the actual loss sustained during the period of liability. As Unit 30 was repaired and placed back in operation on May 18,2009, the insurers maintained that any lost capacity sold after May 18, 2009 was not covered. The power plant's capacity to produce electricity was sold to utilities at auctions conducted by a New York regulator. The amount that TransCanada received from the auction was determined by the auction price and amount of capacity sold. TransCanada's claim for lost capacity sales was based on capacity sales in the monthly auctions. TransCanada did not receive capacity payments for capacity sold at auction until the sale occurred. The auctions for capacity during the period Unit 31 was shut down for repairs were conducted subsequent to the policy period. Thus, the loss, the decreased capacity, was not realized until the auctions were held. Nevertheless, the court determined that the purpose of business interruption coverage was to reimburse the insured for the amount of profit that it would have earned during the period of interruption had an injury not occurred, and to place it in the position it would have occupied had the interruption not occurred. Therefore, the court ordered that the policy covered TransCanada's claim for loss of capacity sales after May 28,2009.
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