Please render an opinion on the following set of circumstances.

The policy in question is the business interruption coverage under a commercial property program with the special causes of loss form. The insured, owner of a motel, had his power lines cut, on premises, by a sewer subcontractor while doing work. An ensuing business interruption loss claim submitted to the insurer was denied under the negligent work exclusion, with the comment, "since the damage was caused by negligent work of the sewer contractor, your policy does not provide coverage for this loss."

Wisconsin Subscriber

Business income coverage is triggered by suspension of the insured's operations caused by "direct physical loss of or damage to property at the premises described in the declarations." The direct loss or damage to property on the insured's premises is the damage to the power line. Therefore, absent a validly applied exclusion, there is coverage for this loss. Damage to property on the insured's premises caused a suspension of operations.

 The negligent work exclusion contains a lead-in phrase: "But if loss or damage by a covered cause of loss results, we will pay for that resulting loss or damage."

 The special causes of loss form is, of course, an open perils (all risks, in earlier language) policy. Unless damage or loss can be brought under an exclusion, there is coverage. The form contains an exclusion of off-premises power failure (B.Exclusions,#e). Therefore, the correct stance is that an on premises power failure is an insured peril.

 Summing up, on premises damage (a cut power line) caused a suspension of business operations. The cause of loss is an on premises power failure. The negligent work exclusion is not applicable because, by its specific provisions, it does not apply if loss or damage by a covered cause of loss results. Business income coverage should be provided.

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