The insured is covered for business interruption under the ISO Business Income (and Extra Expense) Coverage Form CP 00 30 10 12. They also have coverage for Utility Services Time Element (Power Supply) CP 1545 10 12.

The insured claims that a good portion or the majority of business interruption loss was caused by the following:

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         1. Roads and infrastructure were cut off or were rendered inaccessible due to the hurricane, making it difficult or impossible for the insured to deliver (via their auto fleet) their merchandise to clients.  
         2. Loss of sales to end clients who had to close their businesses (supermarkets, restaurants…etc.) because of direct damages caused by the hurricane to their property. 
         3. Lack of diesel/gas at retail stations which limited their capacity to operate their auto fleet and distribute their merchandise to clients. 

Please note the insured does not have coverage or does not have a policy endorsement for Business Income From Dependent Properties. 

Also, it is important to consider the  Business Income Coverage Form also states the following policy, Business Income Coverage Form – 5. Additional Coverages c. Extended Business Income (1), (b), (ii), which reads …However, Extended Business Income does not apply to loss of Business Income incurred as a result of unfavorable business conditions caused by the impact of a Covered Cause of Loss in the area where the described premises are located.  

It is our opinion that there was suspension or cessation of the insured's business activities resulting in a business income loss given backup generators are not designed to operate indefinitely and they are turned off for maintenance purposes. Those losses are covered under the policy. However, we need your opinion on whether business income and extended business income losses resulting from what we previously stated in 1.,2. and 3 are covered given there is no coverage for Dependent Properties, and the policy wording cited under the Extended Business Income specifically excludes business income resulting from unfavorable business conditions.

— Puerto Rico Subscriber

Answer: You are correct that the losses described in items 1., 2., and 3. are excluded. The roads being cut off and the lack of available fuel for the vehicles is excluded as dependent properties because they provide supplies and access to the business. The inability of selling products to end customers because they were not functioning is excluded under dependent properties and loss of income due to unfavorable business conditions.

Related: Your questions answered: Business income waiting periods

Restaurant closed due to robbery

Question: Our insured owns a small restaurant that was robbed at 9:30 p.m. on a Saturday. The robbers locked everyone in a cooler while they emptied the cash drawer and smashed the computer that operates the cash register and customer order system. Because the computer was down, the restaurant remained closed Saturday night and did not open again until its normal opening time of 11:00 a.m. on Monday. The computer was fixed by this time. The insured carried an open perils business income coverage form (without extra expense) and the extended business income option. The insurance company paid the business income loss for the balance of Saturday night and Sunday but refused to honor the extended business income option for the decrease in business the insured suffered during the week following the robbery. Business was down one-third that week.

Related: 7 'soft' targets for summer thieves

The insurance company argues that the decrease in business during the week following the robbery was due to fear of bodily injury in the minds of potential patrons and was not caused by the time required to repair the physical damage to the computer. They maintain that the short-term closing was not long enough to cause the loss of customer base intended to be covered by the extended business income option. We feel that the extended business income coverage should apply.

— Ohio Subscriber

Answer: All of the elements required for a covered extended business income loss are present in your insured's loss. The business was suspended because of direct physical loss or damage to the computer ordering system. The loss was covered by a covered cause of loss. The insurance company admitted this by paying the business income loss suffered from Saturday night until Monday morning. An additional loss of business income began on the date the property was repaired and operations were resumed and ended at the end of the week when the insured's operations were restored to the condition that would have existed if no direct physical loss or damage occurred.

The insured does not have to establish the motives of the customers who stayed away from the restaurant because the policy does not require it. The insurance company's presumption that customers stayed away out of fear of bodily harm is irrelevant, as is the presumption that the restaurant was not closed long enough to lose its customer base. All that is required is a covered loss and a decrease in business during the time period allowed by the policy. These conditions were met by your insured's extended business income loss.

Related: When does a commercial policy provide insurance coverage for extra expenses?

Business not yet in operation

Question: My insured is a major bank that is looking into lending a large sum of money to a concessionaire that will operate in a yet-to-open professional hockey stadium. The loan will be secured by the expected stream of income the concessionaire is expected to earn. What kind of business income options should I recommend that the bank request from the concessionaire to make sure the bank continues to receive its payments if the concessionaire cannot operate due to an insured loss suffered by the stadium. Keep in mind that a major loss could close the stadium for as much as three years.

— Massachusetts Subscriber

Answer: No ISO form would provide the coverage the bank needs the borrower to carry, but a manuscript policy could be devised from ISO forms. There are really three problems involved. First, the concessionaire needs a steady stream of income over three years from which to pay the bank. A business income policy incorporating wording similar to the ISO monthly limit of indemnity option found in the optional coverages section of the business income coverage form CP 00 30 10 12 might be used. Instead of choosing one third or one-fourth of the policy limit as the monthly limit, an amount equal to the loan repayments could be paid at one thirty-sixth a month over three years. That type of coverage would provide the required stream of income to satisfy the bank.

The second problem is that professional hockey is played only in season, limiting the concessionaire's cash flow to certain months of the year. You might recommend coverage similar to ISO's tuition and fees endorsement, which operates by changing the extended business income clause to apply only to certain months of the year. The endorsement would cause the policy to pay for the actual loss of business income the insured sustained during the hockey season that follows the date the property is actually repaired.

Related: Expenses incurred to minimize loss should be covered

Finally, do not forget coverage similar to that included in ISO forms CP 15 08 10 12 and CP 15 09 10 12 (business income from dependent properties — broad and limited forms respectively). It provides coverage if the stadium is damaged, but the concessionaire's facilities in the stadium are not. The stadium would be considered a leader location, which is defined in the ISO form as "property operated by others whom you depend on to:.. d. Attract customers to your business."

Coverage for insured tenant

Question: I have an insured that is a retail auto tire dealer with coverage written on a BP 00 03.

The insured leases the premises. There are underground fuel tanks on the premises; the insured does not own the tanks. The property owner owns the tanks and is now required by the state to remove the tanks. The property owner told our insured the business will need to be shut down for two to four days while the tanks are being removed. Is there coverage for our insured, the tenant, for loss of income due to being shut down?

— Iowa Subscriber

Answer: In order to trigger business income coverage, there must be direct, physical loss or damage to the property caused by a covered cause of loss, such as windstorm or hail. In the situation you describe, removal of fuel tanks is not a covered cause of loss causing the business suspension, so the coverage is not triggered.

Related: The importance of checking insurance provisions in a commercial lease

Dentist abandons practice after fire

Question: Our insured had total fire loss and is insured under a businessowners policy. The insured is a dentist and determined that as of this loss, she would abandon this practice as she had other locations that were more productive.

Since there was a direct loss from a covered peril, but no period of restoration to speak of, will the insured recover any policy proceeds under business income coverage?

— Iowa Subscriber

Answer: In order for business income coverage to be triggered, the insured must suffer an actual loss of business income due to the necessary suspension of operations during the period of restoration. If the dentist is not continuing the business at that location, and it is not going to be repaired or replaced, you are correct that there is no period of restoration, and there is also no loss of income due to suspension of operations. However, under the Loss Conditions of the coverage form, paragraph d. of Loss Determination provides as follows: "If you do not resume 'operations,' or do not resume 'operations' as quickly as possible, we will pay based on the length of time it would have taken to resume 'operations' as quickly as possible."

Editor's Note: The answer to this question was updated on Jan. 17, 2020.  

One location's loss is another's gain

Question: We have an insured who has a covered loss at a franchise restaurant, which has closed its operation during the period of restoration. The insured also has an identical restaurant a few blocks away.

We have determined that the restaurant affected by the loss has suffered a business income loss. However, the other restaurant's business has picked up due to the closure of the original store.

Based on this information, has the insured sustained a total recoverable loss as a result of this loss? Can we take into consideration the increase of business at the other store? Does it matter if the stores are insured under the same or independent policies?

— Ohio Subscriber

Answer: It does make a difference if the stores are insured on the same policy or independent policies. If they are on the same policy, then the increase in business at the other store can be taken into consideration because business income is the net income that would have been earned but for the loss. So, if income from the other store is making up some of the difference, that would be factored in. This would not be the case on separate policies, though, because only the net income of the store insured on that policy would be considered.

Loss of business from a bomb threat 

Question: Would a bomb threat that necessitates the evacuation of insured premises, thus shutting down the insured's operations, be a covered claim under the standard business income coverage form?

— Pennsylvania Subscriber

Answer: Business income coverage under the standard business income coverage form (CP 00 30 10 12) is triggered by a suspension of operations "caused by direct physical loss" of or damage to property at the premises described in the Declarations. Absent physical damage, there is no coverage for suspension of operations caused by threats.

See also:

• Does your Commercial Crime policy cover loss from an imposter's fraud?
• We see you: Catching garaging fraud