On September 30, 2025, the owners of Delaware's Brandywine Plaza Hotel filed a federal lawsuit that should alarm every business owner with commercial insurance. Despite having a policy that appeared to provide full business interruption coverage, a group of major insurers denied most of their $1.5 million claim after a devastating water leak forced the hotel to close.
The lawsuit, filed in the U.S. District Court for the Southern District of Indiana, names multiple insurance carriers who allegedly failed to honor their obligations after a four-inch domestic water line breach flooded the hotel's basement on October 5, 2024. The case exposes a dangerous policy trap that could affect thousands of businesses: the "Actual Loss Sustained" notation that insurers use to deny claims they should be paying.
What Happened at the Brandywine Plaza Hotel
The incident began when a four-inch domestic water line ruptured inside the Brandywine Plaza Hotel in Claymont, Delaware. According to court filings, approximately 12 to 18 inches of water flooded the basement, causing catastrophic damage to critical building systems.
The water impacted:
- The property's electric transformer (causing complete power loss)
- Water supply systems (leaving the hotel without running water)
- Fire sprinkler system pump
- Fire alarm control systems
- HVAC systems
Without power, water, or functioning fire safety systems, the hotel was forced to close immediately. The property remained non-operational for months while repairs were completed.
The Insurance Policy "Trap"
Here's where the insurance dispute gets interesting—and dangerous for policyholders.
The hotel owners had purchased a commercial property policy that included business income and extra expense coverage. The policy's Accord form under "Coverage Information" had the box for "Business Income" checked "Yes." Under the "Limit" field, "$0.00" was written, with a notation stating "Actual Loss Sustained" and "# of months."
The hotel owners believed this meant they were fully insured for business income losses with no predetermined limit. After all, "Actual Loss Sustained" sounds like the insurer will pay whatever losses the business actually sustains, right?
The insurers disagreed.
The $1.5 Million Claim Denial
The hotel owners first submitted a claim for six months of business income loss totaling over $825,000. When the hotel remained closed longer than anticipated, they submitted a supplemental claim for nine months, totaling approximately $1,500,000.
According to the lawsuit, the insurers' response was disturbing:
- Four of the participating carriers paid some amount
- But none paid the full claim amount
- The total paid fell far short of the actual losses sustained
The hotel owners maintain that "Actual Loss Sustained" with no dollar limit means the insurers should pay the full amount of verified business interruption losses, regardless of the total. The insurers apparently interpret the policy differently—despite the clear language suggesting unlimited coverage.
Why This Matters for Your Business
This case highlights three critical business interruption insurance traps that affect thousands of businesses:
1. The "Actual Loss Sustained" Trap
Many business owners see "Actual Loss Sustained" on their policy and assume it means full coverage. Insurers often interpret this language differently, claiming it merely describes the calculation method, not a coverage guarantee.
What you should know:
- "Actual Loss Sustained" is not the same as "unlimited coverage"
- Insurers may still apply hidden limits or exclusions
- The notation can be used as grounds for claim disputes
- Without a specific dollar limit, disputes over what constitutes "actual loss" are common
2. The Composite Policy Problem
The Brandywine case involves multiple insurers participating in a composite policy. When claims arise, each carrier may:
- Dispute their share of the loss
- Point fingers at other carriers
- Delay payment while carriers negotiate among themselves
- Pay only partial amounts, leaving the policyholder to fight for the rest
Businesses with composite or layered coverage often face longer claim resolution times and more frequent disputes.
3. The Time Extension Trap
The hotel initially filed for six months of business income, then extended to nine months when repairs took longer. Supplemental claims are notorious for disputes because:
- Insurers question whether the extended closure was "necessary"
- Each additional month of claimed losses faces intense scrutiny
- Insurers may argue the business owner delayed repairs
- The "period of restoration" becomes a battleground
The Hidden Costs of Business Interruption
Even when insurers eventually pay business interruption claims, they rarely cover all losses. The Brandywine case likely involves costs insurers won't pay:
Uncovered losses typically include:
- Lost customer relationships and goodwill
- Employee retention costs (paying staff during closure to keep them available for reopening)
- Marketing costs to rebuild customer base after reopening
- Lost momentum in business growth
- Damage to online reputation and reviews
- Opportunity costs (business developments that couldn't happen during closure)
For hotels specifically, business interruption extends beyond room revenue:
- Lost catering and event bookings
- Conference room rentals
- Restaurant and bar sales
- Loyalty program point liabilities
- Corporate account relationships lost to competitors
The Brandywine Plaza Hotel's actual economic losses likely exceed $1.5 million when these factors are considered.
What Delaware Businesses Need to Know
Delaware follows standard commercial insurance law principles, but the state has specific requirements for insurers:
Delaware's Prompt Payment Standards
While Delaware doesn't have a specific commercial prompt payment statute like Texas, insurers must:
- Acknowledge claims within 15 days
- Make claim decisions within a reasonable time
- Provide clear explanations for denials
- Act in good faith when interpreting policy language
The Brandywine lawsuit will likely argue the insurers violated their duty of good faith by denying a claim under a policy that promised "Actual Loss Sustained" coverage with no stated limit.
Delaware Case Law on Policy Interpretation
Delaware courts follow the principle that ambiguous policy language must be interpreted in favor of the policyholder. If "Actual Loss Sustained" with "$0.00 Limit" can reasonably be interpreted as unlimited coverage, the court should adopt that interpretation.
However, if the insurer can show the language is clear and unambiguous, the court will enforce it as written—even if the result seems unfair to the policyholder.
Five Steps to Protect Your Business Interruption Coverage
The Brandywine case offers critical lessons for every business owner:
1. Get Your Policy Language Reviewed by an Expert
Don't rely on your insurance agent's verbal explanation of what your business interruption coverage includes. Have an insurance attorney or public adjuster review the actual policy language before you have a claim.
Pay special attention to:
- How "business income" is defined
- Whether there are dollar limits or time limits
- What the "period of restoration" includes
- How "actual loss sustained" is calculated
- What endorsements or exclusions apply
2. Document Everything About Your Business Income
If you have a business interruption claim, insurers will scrutinize every dollar. You'll need:
- At least three years of financial statements showing income trends
- Detailed profit and loss statements by month
- Tax returns proving reported income
- Contracts showing future bookings or expected income
- Documentation of seasonal fluctuations
- Evidence of growth trends before the loss
For hotels specifically:
- Occupancy rates for comparable periods
- Average daily rate (ADR) trends
- Revenue per available room (RevPAR) calculations
- Group bookings and event contracts
- Loyalty program analytics
3. Understand Your "Period of Restoration"
Business interruption coverage typically pays from the date of loss until the business is restored to pre-loss condition, or until the policy limit is exhausted.
Critical questions to ask:
- Does your policy have a maximum period of restoration (common limits: 12, 18, or 24 months)?
- Does the clock start at the date of loss or when you actually close?
- Does "restoration" mean when repairs are complete or when business returns to normal?
- Are there waiting periods before coverage begins?
Many policies have a 72-hour waiting period, meaning the first three days of lost income aren't covered.
4. Don't Accept Partial Payment as Full Settlement
The Brandywine case shows what happens when insurers pay "some" of the claim but not all of it. If an insurer offers a partial payment, make sure any settlement agreement:
- Clearly states whether it's a partial payment or full settlement
- Reserves your rights to claim additional amounts
- Doesn't include broad release language
- Specifies whether it covers only certain time periods
Never sign a release until you're certain all your losses are accounted for.
5. Consider Hiring a Public Adjuster Immediately
After a major loss that will interrupt your business, consider hiring a licensed public adjuster before you even file the claim. Public adjusters work for you, not the insurance company, and they:
- Document losses insurers often overlook
- Prepare detailed business income calculations
- Negotiate directly with the insurance company adjusters
- Typically increase claim payouts by 40-60%
- Work on contingency (usually 10-15% of the recovery)
For a $1.5 million claim, a public adjuster's fee might be $150,000-$225,000, but they might recover an additional $600,000 you wouldn't have gotten otherwise.
The Lawsuit's Implications
The Brandywine Plaza Hotel case is currently in early stages in federal court in Indiana (where one of the insurers is apparently headquartered). The outcome will have significant implications:
If the hotel wins:
- Insurers will face pressure to clarify "Actual Loss Sustained" language
- Other policyholders with similar policy language may have stronger negotiating positions
- The insurance industry may revise standard forms to avoid ambiguity
If the insurers win:
- Businesses with "Actual Loss Sustained" notations should immediately seek clarification
- The insurance industry will continue using ambiguous language that sounds protective but isn't
- More businesses will face claim denials on policies they believed provided full coverage
What Business Owners Should Do Now
You don't need to wait for a water leak or other disaster to protect your business. Take these steps today:
- Pull out your commercial property policy and look at the business interruption section
- Check for "Actual Loss Sustained" language or dollar limits
- Call your agent and ask for written clarification of what's covered
- Consider increasing your business interruption limits if they're too low
- Review your policy annually as your business grows
For hotels and hospitality businesses specifically:
- Consider "contingent business interruption" coverage (pays if suppliers or attractions near you are damaged)
- Review whether your policy covers "civil authority" closures (if government orders you to close)
- Ensure your policy covers loss of conference and event bookings
- Check whether your policy includes "extended period of indemnity" (coverage for the ramp-up period after reopening)
Final Thoughts
The Brandywine Plaza Hotel case is a stark reminder that business interruption insurance is only as good as the language in your policy and your insurer's willingness to honor it. Too many business owners discover gaps in their coverage only after disaster strikes.
The hotel owners did everything right: they bought insurance, they documented their losses, they filed their claims properly. And they're still fighting for payment a year after the incident.
Don't let this happen to your business. Review your coverage today, demand clear answers about ambiguous language, and consider working with an insurance professional who represents your interests, not the insurance company's.
The best time to fix your business interruption coverage is before you need to file a claim.
Need help reviewing your business interruption coverage or filing a claim? Contact a licensed public adjuster or insurance attorney in Delaware. For businesses in Delaware seeking commercial insurance with clear, unambiguous coverage, reach out to independent agents who can compare policies across multiple carriers to find the best protection for your specific business.