Business interruption and contingent business interruption claims loom as a large issue following ‘Superstorm’ Sandy, as thousands of businesses of all sizes deal with flooding, physical damage, power outages, government orders and supply chain disruptions.
Finley T. Harckham, shareholder in the Insurance Recovery Group at law firm Anderson Kill & Olick, says he expects “huge battles” between business policyholders and insurers over whether interruption losses are covered.
“It all depends on the policy and triggers,” he tells PC360. “Much of the coverage is tied to physical damage—damage covered under your policy.”
Business interruption covers businesses for losses stemming from unavoidable interruptions in their daily operations as a result of physical damage, but if damage was due to an uncovered peril—flood, for instance—coverage may not be available.
Also, businesses may have coverage for loss resulting from evacuation by order of civil authority, triggered when authorities close off access to a damaged area. Damage to the insured’s own property is not required to trigger coverage but the order typically must result from property damage of a type covered by the insurance policy.