At issue in this case is the interpretation of the policy's use of the word "and" between the two components of "Business Income" a. Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred; and b. Continuing normal operation expenses incurred, including payroll."

 NY Marine argued that "and" meant that a. and b. had to be added together to determine business income, and that any net loss had to be deducted from the amount of continuing operating expenses when calculating payout for lost business income. Mullins asked the district court to find that he was entitled to the payment. None of the facts are disputed, the decision completely rests on the district courts determination of the interpretation of the policy terms.

 The district court ruled in favor of Mullins and ruled that he was entitled to the $122,977. In the decision, the district court relied on another case where the California court of appeal interpreted language nearly identical to the NY Marine policy language. The court of appeal stated that when taking into consideration the plain meaning of the policy an insured is entitled to be paid under both subparts without having to offset the two numbers in cases where operating expenses exceed net income.

 The district court agreed with the court of appeal on the case at hand and determined that the NY Marine policy covered "two distinct components", both profits and continuing operating expenses. The district court may have determined otherwise, but NY Marine failed to cite any California authority that had interpreted the policy as considering the two components together as a single insurable interest instead of as two distinct insurable interests. NY Marine argued that the policy language interpretation of the court would result in a "windfall" for policyholders because a business that was losing income before an interruption potentially could recover more in insurance proceeds after the interruption than the business would have earned if the business continued operating normally.

 The district court determined that if a catastrophic event damaged an insureds business premises and prevented normal business operations, the business would be faced with two different problems, a loss of money coming into the business and payment of ongoing fixed expenses even though money was no longer coming in.

 Editor's Note: In the 1990's courts in other states reached the opposite opinion. The court certified the question as to whether, under state law, the insured was entitled to recover the amount of its "continuing normal operating expenses" under the terms of a business interruption insurance policy issued to it by the insurance company. The Supreme Court of Tennessee answered the question in the negative, holding that business income within the meaning outlined in the policy meant adding the insured's net income to its continuing operating expenses and that, because the insured operated at a loss, it was not insured for coverage. That case is Cont's Ins. Co. v. DNE Corp., 834 S.W. 2d 930 (Tenn. 1992).