Recent summer storms caused business owners in several states to close their doors due to power outages caused by high winds downing power lines. Many have been surprised to find that their Business Income Insurance did not include coverage for this interruption of power.
Business interruption coverage (also known as business income coverage) can be extended to include losses due to interruptions in utility services. Utility Services-Time Element provides coverage for a loss of income due to interruption of power, water supply, and communications. The business owner may select coverage for any or all of these utilities. Power and communications have an additional option to include coverage for overhead transmission lines – which is what was needed for those affected by the downed power lines. This form pays loss of profit plus continuing expenses, up to the selected limit or until service is restored.
Some important points:
- Utility Services-Time Element is an extension of Business Income Coverage so it cannot be purchased by itself.
- Any waiting period or deductible that applies to the Business Income will also apply to the Utility Services extension.
- The loss to the utility must be due to a covered cause of loss. For example, if the Cause of Loss form selected does not provide coverage for weight of ice, sleet or snow, an event caused by an ice storm would not be covered.
And did you know that coverage is also available for direct damage to an insured’s property caused by interruption of Utility Services (such as damage from a power surge)?
Businesses that heavily rely on power, water, or communications from a utility supplier should speak with their agent regarding coverage for losses due to interruptions in supply from a utility company.
Did you lose power as a result of the storms? How did it affect your business?
The policy coverages described above are in the most general terms and are subject to the actual policy exclusions and conditions. For specific coverage details and policy exclusions, refer to the policy itself or contact a Central Agent.
such a misunderstood coverage .. thanks for the kick-in-the-pants article!
Glad you found it worthwhile!
Pam, does outage coverage exist for power companies? If they have a problem generating power, transmitting, or distributing, does coverage exist to make up for that?
Hi Mr. Butler,
After 30 years with Central, Pam has retired so I’m responding to your inquiry. Unfortunately, I’m not going to be able to give you a lot of specifics on this one. The insuring of power companies is very specialized and only done by a select number of insurance carriers. Central does not provide coverage for power companies. However, there should be coverage available for the exposures that you have referenced. We recommend that you contact a local independent agent or broker to assist you in finding a carrier with the expertise to insure this class of business.