Hurricanes damage businesses in many ways. After Superstorm Sandy in 2012, utility service was interrupted in many communities on the East Coast due to downed power lines, broken trees, and flooding. Many businesses were without power—even businesses that did not suffer other major property losses in the storm.
While power was restored to some properties the next day, others were without power for weeks. Thousands of business owners throughout the northeast region found it impossible to run their companies without power—and not all of them had the insurance coverage they needed for their losses. Before disaster strikes, Attorney Bill Voss urges business owners to find out how their current insurance policies cover utility outages following a hurricane or disaster.
Business Interruption Insurance and Utility Outages
When a business doesn’t have access to power, water, and other utilities, it can’t operate effectively. However, business interruption insurance policies differ in their coverage of interruption due to power and utility outages. Policyholders need to turn to their specific insurance policies to determine if they have utility service coverage that would help them recover their losses. Some commercial property insurance policies will include provisions stating that there is coverage for a company’s inability to operate because it did not have power. Under these policies, business owners should be able to claim “service interruption” due to power outages and recover losses arising from an interruption of utility services.
However, if the loss of power was due to equipment failure on a company’s own premises, there is no coverage. Additionally, some commercial policies will exclude service interruption coverage or power outage coverage altogether if the outage originated off the insured’s premises.
Off-Premises Utility Coverage
Off-premises utility coverage covers loss of profits that result from a loss of power, water, gas, or telephone service due to direct damage that occurs at a location other than your premises. This endorsement is added to your policy and often excluded by other insurer’s policies, citing no coverage for “overhead” transmission lines.
Why is this important? During severe storms like Superstorm Sandy, for example, many businesses are closed due to power outages. Many of these properties would not have had coverage for business interruption because there was no direct physical damage. Could you afford to be without power for several weeks and find out that you didn't have coverage due to the off-premises exposure? Call your agent to make sure this is a covered cause of loss. If not, request to have this endorsement added to your policy.
Get Help With Commercial Utility Outage Claims
Commercial insurance policies can be hard to understand because each policy has specific language and different provisions and exclusions. An experienced attorney can help businesses determine if they have business interruption coverage and how they can best recover their business losses following a storm or disaster. For help submitting a successful claim, contact the Voss Law Firm directly, or ask for a free copy of our book, Commercial Insurance Claims: The Basics.