What is “Off Premises Utility Services” Coverage?
This coverage gives you loss of profits that result from a loss of power, water, gas or telephone service due to direct damage that occurs at a location other than your premises. This endorsement is added to your policy and often excluded by other insurer’s policies, citing no coverage for “overhead” transmission lines.
Why is this important? For example, during hurricanes, many businesses were closed due to power outages. Many of these stores would not have had coverage for business interruption because there was no direct physical damage. Could you afford to be without power for several weeks and find out that you didn't have coverage due to the off premises exposure? Call your agent to make sure this is a covered cause of loss. If not, request to have this endorsement added to your policy.
Loss of power or other utility services such as gas or water can be a minor discomfort and inconvenient if the disruptions are resolved rather quickly. When the utilities are out in a large geographic area, the service interruption can be a major event that lasts in some cases weeks. It is not all uncommon to see utilities out for extended periods when hurricanes come ashore or, in northern climates when winter ice and snowstorms hit.
Most property insurance policies unless specifically endorsed will not cover losses from utility services that occur off premises. As a result, the losses can be severe not only in terms of discomfort, but also in the form of a major financial loss to business.
If you have suffered a loss due to utility failure and your claim has been denied, make sure you and your insurance company have properly investigated the facts of the loss. We have claims where we were able to prove that the power loss occurred on the insured side of the electric pole and thus it occurred on premise as opposed to an off premise power failure.
If your business has stock that is subject to spoilage in the event of power failure, you would be well advised to discuss with your agent proper insurance coverage that may be available for this risk. Back up generators are another option as long as they are properly maintained and adequate fuel is available.
Remember that in 2003, the United States experienced a massive power failure that left New York City and other major metropolitan areas without power in excess of 24 hours with a reported 87,000 miles of power lines affected. For some of us that have been around New York City also had a blackout that occurred in 1977. Therefore, we would be well advised to remember history if faced with a significant risk of loss due to power or other utility services.