Properties Go Dark
Sandy and BI Claims Due To Suspended Operations
By Susan Massmann, CPCU
Natural disasters often leave many business interruption (BI) losses in their wake. Superstorm Sandy will be no different. Businesses that did not sustain damage or were not even closed can nevertheless be subjected to losses when other companies with whom they do business must suspend
operations. Such is the case for the clients of the FC&S subscriber who sent us the fol-
“We have received a handful of business interruption claims as a result of Superstorm
Sandy. I have a question as to arrangement and primacy of coverage and how it may af-
fect the interpretation of coverage.
In a couple of claims the insured was outside the main area of the
storm; however, the businesses to which it supplies its products were
affected by the storm. In general our insured’s policies include an ISO
Business Income and Extra Expense form with additional coverage for
civil authority. There is also additional coverage with sublimits for dependent properties and off-premise power interruption.
My primary question is centered on the Dependent Properties extension of coverage.
In its unendorsed state the coverage part provides business-income loss to our insured
because [it] could not deliver its product to the buyer. However, to trigger coverage there
must be direct physical damage to the receiving location by a covered cause of loss. In
most cases this did not happen. The receiver closed down due to lack of power or civil
Following the thread, we have two additional coverage parts—Civil Authority and Utility Services— in which the
endorsements state that if the insured’s
premises is shut down due to either condition, coverage will apply under the appropriate extension.
So what comes first? If I apply the
While the type of loss that our subscriber
describes seems like it should be
covered, the requirement for direct
physical damage at the dependent-property location remains problematic.
Dependent Properties endorsement
first, does that in effect expand the insured’s covered locations from its own
to its own and its receivers? If that is the
case, I then should be able to apply the
Civil Authority or Utility Service cover-