Business Interruption Insurance and Civil Authority Insurance

During a hurricane, wildfire, flood or other catastrophe, it’s not uncommon for businesses located in or near the damaged areas to find access to their business denied by civil authorities. The question then becomes: Does Business Interruption (BI) insurance cover loss of use of premises?

The answer is: Yes. Common to most, if not all, commercial policies is a Civil Authority insurance coverage extension. This extension covers loss of business income, rental value and extra expenses incurred because of denied access or forced evacuation. 

Civil Authority Insurance Requirements 

There are a few important conditions that must be met for the BI Civil Authority insurance extension to apply:  

  1. The denial of access must be due to an incident of physical damage to a nearby property. 
  2. Damage to that nearby property must be due to a peril covered under your insurance policy. 
  3. There is a limit to the length of time the BI coverage applies. It is usually between 15 and 30 days.
  4. BI coverage almost always has a deductible in the form of a waiting period. The typical range is 24-72 hours.

Civil Authority Insurance Coverage 

Consider the following real-life example of a covered BI Civil Authority extension loss: 

A hurricane hit a small coastal town and caused extensive damage to local businesses. The civil authorities closed off the streets leading to and out of the four-block radius around the damaged area. Access to a garment business on a side street adjacent to the area was denied for over a month. As a result, the owner incurred costs to set up temporary offices, lost revenue due to turning away business, and had to engage in over-time production once they were allowed back into their facility -- all of which were viable claims covered by his BI Civil Authority extension.

Do you have Civil Authority insurance coverage? 
While most BI coverages come with the Civil Authority extension, check with your HUB broker to determine that your BI coverage includes this extension, and to ensure that you have adequate coverage limits should you need to take advantage of the Civil Authority extension this hurricane season.