Navigating Off-Premises Service Interruptions Claims

The recent aftermath of two powerful hurricanes pummeling the coasts of Texas and Florida has left insurance companies with a lot of financial responsibility. Assessing the damage and rebuilding is going to take time, but nothing will be back to normal until businesses are back on their feet.

Suffering billions of dollars in damages, businesses were hit twice as hard — their property was destroyed and their business operations were interrupted. The loss in revenue is nearly impossible to calculate, but it is certainly significant. Thankfully, insurance policies can cover such business interruptions and help companies recover from a natural disaster. Unfortunately, insurance companies are on the hook for large amounts of cash, and they are turning to unethical practices to save their bottom line.

Wide-area disasters, such as Hurricane Harvey in the Gulf Coast, are putting enormous pressure on insurance companies dealing with business interruption claims. Policyholders are shocked when they submit a claim for their business and the insurance company fails to fulfill their end of the bargain. This negligence can range from offering less than the policy states to outright ignoring claims that were filed. The large number of impacted policyholders really exacerbates the situation, and it’s only going to get worse.

Coverage for you business typically includes business interruption. Business interruption policies deal with direct damage coverage and time element coverage. Policyholders can have one or both clauses in their policy. Even if your company sustained little or no physical damage from Hurricane Harvey, chances are your area’s utility providers were affected. Unlike residential buildings, businesses without electricity and water are in grave danger, and it poses an immediate threat to a business’s survivability. Telephones and internet can also be affected after a storm, and are essential elements to modern day business.

Referred to as “off-premises service interruptions,” specific coverage for these types of interruptions is not a standard or common inclusion among commercial insurance policies. However, endorsements within your business interruption policy can be applied to this scenario and add to your coverage. These policy endorsement can vary wildly, so here’s a breakdown of what really matters.

Utility Services – Time Element

This endorsement usually applies to the business income coverage form, and applies when business operations are suspended. Here’s what services the endorsement covers:

  • Water providers, such as pumping stations and water mains.
  • Utility systems for removing wastewater and sewage. This does not apply to systems designed to drain storm water, and the endorsement does not cover an interruption to business because of a backup of sewage due to heavy rainfall or flooding.
  • Communication systems, such as telephone, radio, microwave, or television services that prevent regular business operations from taking place can be covered. This clause does not apply to overhead transmission lines, unless specifically noted otherwise.
  • Systems that supply electric power, such as utility generating plants, switching stations, substations, transformers, and transmission lines. Again, overhead transmission lines are not covered unless specifically mentioned in the policy.
  • Coverage under this endorsement does not apply to any loss of electronic data, including destruction or corruption of the data.

Some limitations may still exist in your policy. For instance, some policies limit the distance between the policyholder’s business and the affected utility, or exclude specific natural disasters, like floods. Navigating your policy and identifying key portions of your endorsement are critical to maximizing your settlement. If you have any doubts, seek legal council.

Policies cover different weather damage depending on the type of storm that caused the damage. Hurricanes, tropical storms, windstorms, and floods all fall under different categories when it comes to insurance coverage. The type of damage resulting from the storm is also subdivided into different groups. For instance, water damage from wind-driven rain is not the same as storm surges, which is also different from flooding. Kinda confusing, right?

It’s really important to have a thorough understanding of what coverage your policy provides, depending on the cause of damage, for different sub-limits, deductibles, and business interruption waiting periods. The insurance companies riddle their policies with intentionally confusing language, hoping policyholders won’t fully understand their options. We can help.

If your business was affected by off-premises utility interruptions, and you are insured, we can help you get the most out of your claim. Williams Hart has the technical understanding to prevent insurance companies from taking advantage of your options. The road to recovery is still ongoing, but with our help, you and your business can recoup the losses from Hurricane Harvey. Don’t let the opportunity to get what you deserve go to waste. Our attorneys are dedicated to building our community back to where it was before the storm, and we want to help you. Business interruption claims are heavily contested by insurance companies, so contact us today.


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