December 21, 2022:  This article has been archived, as the coverage has been changed by ISO to Utility Services – Direct Damage. Refer to this article for more current information:  

Utility Services Direct Damage and Time Element Losses and Coverages

 Summary: Both private and public companies that are service providers such as water companies, gas dealers, and municipalities are likely to find a failure to supply exclusion on their primary and umbrella/excess liability policies. It is difficult to pin down the purposes of these exclusions because they vary in scope. Considering the standard ISO endorsement (CG 22 50) however, the purpose is to preclude coverage for injury or damage arising out of the failure to adequately supply gas, water, oil, electricity or steam (the April 2013 edition of CG 22 50 adds biofuel to this list). Coverage remains intact, however, if the failure to supply results from the sudden and accidental injury to tangible property owned or used by an insured to transmit such services.

Not all endorsements issued today contain the exception found in the ISO endorsement, and, based on the few cases that have involved failure to supply exclusions, coverage has not been denied solely because of the exclusions. The exclusions, in other words, are significant but are not the sole reason coverage is denied. This discussion helps to point out the purpose for these exclusions, how they apply in cases, and how they vary by insurer.

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