The insured is a food wholesaler who submitted a business interruption claim due to Hurricane Maria. Although the insured sustained only minimal direct damages to their food warehouse and offices their electrical services were interrupted as the electrical power grid was severely affected by the effects of the hurricane. The insured however, was able to restore their operations immediately after the hurricane with the assistance of a backup generator which has the capacity to handle the insureds entire business operation. Electrical power from the power grid was restored approximately four (4) weeks after the hurricane.   

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 following; 

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  1. Roads which were cut off or were rendered inaccessible due to the effects which the Hurricane had on road infrastructure 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 under 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

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.

 

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