For public safety reasons, businesses near a fire or accident site may not be accessible during or immediately following the crisis. Here are some coverage issues to consider if a business owner does not have access to their business due to evacuation or unsafe event.
Does Business Interruption (Business Income) insurance respond to claims for such loss of use of premises?
Yes. Common to most commercial policies is the Civil Authority extension of coverage.
With the Civil Authority extension, coverage applies to loss of business income, rental value, and extra expenses because of denied access or forced evacuation.
However, there are two important elements that must be present for coverage to apply:
- The denial of access must be due to an incident of physical damage to property nearby
- Damage to that property nearby must be due to a peril covered under your insurance policy
Also, there is a limit to the length of time coverage applies. It is usually between two weeks to 30 days. It is advised to consult your broker or read the policy for specific coverage details.
Example of a covered loss:
A major fire in the heart of the city caused extensive damage to property and adjacent businesses. The civil authorities closed off major streets leading to and out of a 4-block area around the fire site. Access to your business on a side street close to the fire is denied for over a month. As a result, you incurred costs to set up temporary offices.
You had to turn away business. You authorized over-time production once you were let back into your facility. All these examples of loss should be covered under Civil Authority, subject to the time limit of your coverage.