As a result of Hurricane Sandy, a few questions have arisen regarding business insurance coverage. Below is one of the most frequently asked question:
What does Contingent Business Interruptions coverage encompass? For example, will businesses be reimbursed for supply chain disruptions due to closed roads, shuttered hotels due to dangling cranes, and retailers and coffeehouses lacking electricity?
Contingent business interruption (CBI) insurance covers lost income to an insured business when the business property is physically damaged, thereby disrupting the flow of goods or services to your business. Because direct physical damage caused by a covered loss is essential for CBI coverage, those businesses shut down by Sandy due to a lack of power, closed roads or evacuation orders may not be able to show the physical damage to suppliers necessary to trigger CBI coverage.
However, other types of insurance may cover business losses in the wake of Sandy. For example, a policy may include Utility Interruption Coverage, which covers income lost due to a lack of incoming electricity even though there is no direct physical damage to the insured’s property. Civil Authority Coverage may also be available to hotels and retailers for losses suffered when access to their businesses was prohibited.
Similarly, businesses may find that their commercial insurance policies include Lack of Ingress/Egress Coverage, which generally covers losses sustained when entry to or exit from an insured’s property is denied because of closed roads or other storm-related destruction. These coverages generally apply, however, only if the loss was caused by a non-excluded peril.
Businesses therefore should review their policies carefully to determine the scope of coverage and whether their loss is caused by a covered peril. With many business and property policies containing flood and water exclusions, causation questions are likely to be a focal point of claims to come.
For more information, or for a review of your business insurance policy, contact TriState Business Insurance.