Business Income from Freeze Losses

After the unprecedented winter storm that hit Texas last week, many agents and business owners want to know if Business Income coverage is available for a business that is forced to close because of a loss of power or water.

There is an exception to the utility services exclusion in the Special Form if the loss of power or water results in a covered cause of loss to the property. There is a separate exclusion for water damage that results from freezing unless the insured does their best to maintain heat in the building. So, if the insured did not turn the heat off, coverage should apply.

What if there is no direct damage at the location? The ISO CP 15 45 is designed to provide business income coverage resulting from a loss of utility services. The endorsement requires the selection of the types of property supplying the service. Any or all of the following can be included:

• Water Supply Property – Pumping stations and water mains
• Wastewater Removal Property – sewer mains, pumping stations but not storm drains
• Communications Supply Property – Coaxial cables, transmission lines with an option for overhead lines, and microwave radio relays
• Power Supply Property – utility generating plants, switching stations, substations, transformers, and transmission lines with an option for overhead lines.

Business Income coverage applies when there is direct damage to the types of property selected by a covered cause of loss.

The endorsement has a waiting period before coverage begins. Unlike the standard coverage, which requires 72 hours, the number of hours in the endorsement is not preset and can be left blank if no waiting period applies.