The Service Interruption Crisis Portends Yet Another Deluge Of Insurance Claims And Litigation (JD Supra)

The Service Interruption Crisis Portends Yet Another Deluge Of Insurance Claims And Litigation

  Wednesday, February 24th, 2021 Source: JD Supra

In recent days, we have been watching a disaster play out in Texas. A blast of arctic air that plunged south caused natural gas and oil pipelines to freeze, interrupting the supply of fuel to power plants, and ultimately causing a massive blackout across the state.

For businesses that have been shut down yet again due to circumstances beyond their control, they may be asking the same question that they asked when the first coronavirus stay-at-home orders issued last year: Do I have insurance to cover this.

The answer is also much the same: Maybe.

The basic commercial property policy form that some smaller businesses may have purchased does not cover business interruption losses due to lack of utility service that occurs off premises.

The reason is relatively simple. Coverage extends to direct physical loss or damage to insured property and attendant business interruption, but if a transformer miles away from an insured location sustains physical loss or damage, there may be direct physical loss to property, but not to the policyholder’s property.

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