Utility Services Coverage


Storm season is always a good time to review a key coverage for businesses called Utility Services - Time Element."


Business Income coverage in the property portion of a policy is triggered by direct physical damage to the insured premises. The direct damage has to be severe enough to prevent the business from normal operations. Once triggered, Business Income will usually have a deductible stated in hours (ranging from 12-72, depending on the carrier). The deductible is retroactive, so if you incur severe enough damage and the policy had a 48 hour deductible, then coverage will start with the 49th hour. Business Income coverage covers the loss of net business income plus ongoing expenses while your business is shut down.


A problem arises though, when a business is shut down to due an off-site power failure, such as damage to a sub-station or downed power lines off of your premises. In cases like these, there is no "direct" physical damage to your business. This is when Utility Services coverage becomes key.


Utility Services (sometimes called Off Premises Power Failure in some policies) is coverage for a loss due to lack of incoming electricity (or other utility, such as communications, gas or water), caused by damage from a covered cause to property away from the insured premises such as power stations, sub-stations, lines and transformers. It's not provided in a standard policy form, but is often available by endorsement. Utility Services Interruption coverage endorsements vary widely as to what utilities are included, whether both direct damage and time element loss are covered and whether overhead transmission lines are included.


Claim settlements are based on your sales, less the cost of the goods you sell, ordinary payroll and continuing expenses. You may be able to recover 30 to 45 cents on the dollar. While that may not sound like much, it's better than nothing, and with this economy, every little bit is crucial.


As usual, you should read your policy to verify what coverage you do and don't have. This could be a very helpful coverage for your business that you may not have any idea if you have.