Our insured, an auto dealership, has business income coverage under ISO form CP 00 32 10 91. In March of 1994, a severe snow storm struck the area, dumping up to two feet of snow.  Wind gusts caused drifting to such an extent that roads became impassable, and most businesses and government offices were shut down. Because there was no access to the dealership, it was forced to close even though it sustained no actual physical damage to buildings or contents. Normal operations resumed when snow was removed from roads, drives, and parking lots.

The insured has made a claim for loss of business income based on the accumulation of snow rendering the dealership useless until access was restored.

We have denied the claim because there was no direct physical loss to the property; however, since this question has arisen several times, we now wonder if we were correct.

Texas Subscriber               

You are correct. In the case you describe loss of business income is not payable. The ISO form states "we will pay for the actual loss of Business Income you sustain due to the necessary suspension of your 'operations' during the 'period of restoration.' The suspension must be caused by direct physical loss of or damage to property at the premises described in the declarations…caused by or resulting from any covered cause of loss." Further, the "period of restoration" begins with the date of direct physical loss or damage and ends on the date when the property at the described premises should be repaired.

The insured auto dealer suffered no direct physical loss to his buildings or business personal property. When no direct loss is sustained, no business income loss is payable.

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