Business income coverage following a computer crash

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Question: I have a coverage question in regard to business insurance and extra expenses coverage.

I insure a manufacturer that had their computer system crash, causing them to lose very vital information needed to keep the business running. The insured had their existing employees work to rebuild all the programs and input all the necessary information in order to get back up and running. They did this instead of hiring an outside third party since they believed it would be much more cost-effective and efficient.

With this being said, their employees had to take time away from their typical daily job tasks to get the company back up and running. My insured is looking to be reimbursed for this cost. They had to push out sales and shipments since they had to allocate efforts to rebuild their software. My understanding is that these extra expenses or incurred costs should be covered. Am I correct?

— California Subscriber

Answer: In order for business income or extra expense coverage to apply there must first be property loss or damage from a covered cause of loss, as described in the applicable cause of loss form attached to the policy. In this situation, it does not appear that there was a covered peril that damaged the computer system. In the absence of a covered peril loss, the business income nor extra expense coverage would apply.

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