By: Arnie Mascali
With Joaquin Looming . . . some advice to make sure your business is protected.
Like individuals and families, business owners are closely watching as Joaquin tracks towards the US Mainland. While predictions vary, now is a good time for businesses to consider the impact this powerful storm may have on their income. Business owners need to recognize that sometimes damage to other property near to them could represent a substantial income loss for their own businesses. Many property insurance policies cover such income loss under two separate terms:
Interruption by Civil or Military Authority: Policies can extend coverage for the actual income loss sustained during the period of time when access to the business owner’s property is prohibited by an order of civil or military authority, so long as the order is the direct result of a cause of loss that would be covered by the business owner’s policy. For example, let’s assume that a bakery purchases a property policy that covers its business income for damages caused by a windstorm. If Joaquin (a “windstorm”) is headed towards the bakery, and the governor orders the area around the bakery to be evacuated for 3 days, the income loss resulting from that “civil order” could be covered by the bakery’s insurance policy. This is important coverage - even if the bakery did not sustain ANY property damage your risk is mitigated. The fact that the bakery lost income for 3 days as a direct result of the order prohibiting access to the bakery would trigger coverage.
Contingent Time Element: If a supplier or key customer sustains damage as a result of Joquin, wholly or partially preventing that supplier from providing goods to an insured, or prevents the customer from accepting the goods, the income loss to the insured would be covered by this provision. Again, let’s assume the bakery has a property policy which includes Contingent Time Element coverage. If Joaquin spares the bakery from damage, but does strike a warehouse distributor which supplies the bakery with certain goods, the income loss the bakery will sustain because of the failure of the distributor to supply those goods is a covered income loss. Too many policyholders fail to recognize this coverage. Too many assume that their property policies only cover income losses related to damage to their OWN property. But in a smartly constructed insurance program, especially where a business depends upon a key supplier, damage to property of that supplier which causes losses of income for the bakery, would be covered under the bakery’s policy.
Please consult your insurance broker for more information about business interruption coverage, claims, and risk management. With a storm headed our way . . . now is a good time.