Are You Protected If A Civil Authority Action Impacts Your Business?

Many insureds grapple with the impact of lost income when a civil authority takes action as a preventative measure to limit catastrophic loss.

A civil authority clause outlines how the loss of business income coverage applies when a government entity closes or denies access to the insured property. Here are a few situations to consider:

  • A local authority evacuates as a precaution due to impending weather conditions:
  • A utility limits, or discontinues service in an effort to limit, or contain the exposure that can exaggerate a dangerous event
  • Construction creates detours around a normal traffic pattern which impacts your business

When a civil authority orders an evacuation that’s mandatory, most insureds feel that the civil authority endorsement on their coverage affords them protection for any business income loss (as a result of the civil authorities action).

Unfortunately, what isn’t provided is that the trigger is always a direct physical loss to your business. This means that even though you’re ordered to evacuate if your business doesn’t suffer a direct physical loss, there’s no trigger that will create a covered claim.

When a utility takes preventive measures to limit the impact of a weather related event, it’s important to consider that, while this creates a business income loss for your downtime, it may not be a covered loss due to the way coverage is designed.

It’s important to review your current program to determine when you may have a gap in your coverage, and if it’s a situation where there is no coverage solution, you need to know it.

Construction which detours your normal traffic pattern can impact your income when the construction is caused by a downed power line(s), accidents that impact a utility (like water/sewer) and/or cable/communications that are damaged by a covered loss.

If you have off premises power failure, water, communication coverage endorsed on your current program, then the resulting loss of income could be covered for a specific amount.

If you have any questions about this topic or you would like to learn more about how you can protect your business from these times of claims, please feel free to contact me.

If you would like to see what is available for your company, and receive some analytics to determine your amount of risk and cost, we would love to review your program and offer alternatives and solutions.

About Hugh Scott

Hugh Scott has over 20 years of experience insuring hundreds of multi-state, multi-location franchised and non-franchised restaurants across the United States and Canada. As Sr. Vice President with Bolton’s Restaurant practice, Hugh helps clients in this ever-evolving industry review, develop and strategize insurance programs that serve their individual business needs and objectives.

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