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558 HARVARD BUSINESS REPORTS
The insurance agency called the attention of the treasurer of the Boylston Theater to the fact that inadequate coverage would result in fractional reimbursement for any loss that might occur through a full or partial suspension of exhibitions because of fire.3 It was suggested that the agency be furnished a record of past receipts and expenses in order that adequate coverage might be determined.
Weekly box office receipts for the preceding three months
were listed as follows:
April 4 ยง13,400 May 2 $16,300 June 6 $17,500
11 15,900 9 17,800 13 22,000
18 14,200 16 16,500 20 20,000
25 16,400 23 14,600 27 18,500
30 18, 100
The period was considered sufficiently typical to serve in determining the average weekly gross receipts. Fluctuations in box office revenue occurred in this period because the weekly entertainment varied in popularity, because of weather changes, and because of Lent.4
The theater's expenses included film rentals, vaudeville costs, salaries, interest on indebtedness, taxes, depreciation, heat, light, advertising, and miscellaneous operating expenses. Of these expenses, only those for film rentals, vaudeville, insurance, heat, and light were contingent upon operation. The degree to which they could be eliminated during business interruption depended, however, upon the length of the period of suspension and the nature of the existing salary and film contracts. In the event of full suspension for an entire week or longer, the vaudeville cost would be entirely eliminated. This expense was approximately $1,500 per week. It was estimated that under existing contracts a reduction, in part, of film rentals, averaging about $2,000 per week, the actual amount varying with the particular film, could be effected if the theater were closed for the week in which the film was to be exhibited. Electricity expense would be considerably reduced during any interruption of exhibition of a day or
3 "It must be borne in mind that the company's per diem liability is fixed, and only the proportion of this liability which the decrease in production or business bears to full production (an average of the actual full production or business) is collectible. Therefore, if the insured has failed to ask the company to assume an adequate amount of liability, he cannot expect to be reimbursed on the basis of full coverage." Montgomery, R. H. Financial Handbook, p. 676.
4 Industries of seasonal production commonly carry use and occupancy insurance with indemnities adjusted for particular periods in which the liability of greater loss is present.