UNDERSTANDING UTILITY SERVICES TIME ELEMENT COVERAGE
A Case Study
Graduation weekend at the University of Notre Dame and St. Mary’s College is traditionally one of the busiest weekends of the year for restaurants and bars in downtown South Bend, Indiana. In 2015 those businesses faced a worst case scenario when an overnight fire severely damaged power circuits in the city’s underground power grid system. The power company was forced to cut power to most of downtown South Bend on Friday the 16th, the day before graduation.
The power was restored by Sunday evening, less than 72 hours after it was interrupted. Some fortunate businesses were able to secure generators and stay open; most were not so lucky. Nearly all the businesses in the area suffered significant economic loss due to the power outage as many had to close all day Friday, Saturday, and Sunday.
As policyholders turned to their insurance for recovery, many discovered some unfortunate news. The loss of business income was not caused by a covered cause of loss to the insured’s property. Therefore no coverage responded. Many of those businesses that did purchase “Utility Time Element coverage” were disappointed to discover that the insurance industry standard deductible is 72 hours. For those insureds, there was no coverage because power was restored within the 72 hours.
Illinois Casualty Company (ICC) policyholders received better news. Insureds purchasing this coverage from ICC learned that their policy contained a 6-hour disappearing deductible rather than the standard 72-hour deductible. Since the outage exceeded 6 hours, the deductible “disappeared” and business interruption coverage applied immediately.
While this event occurred in northern Indiana, the same type of exposures exists for ICC’s Missouri Restaurant Association members. Ice, snow, and wind events are the most common causes of an interruption in utility services. If that event occurred over a traditionally busy weekend, the potential loss of income and profits could be equally devastating.
Business owners are often confused and perplexed by the complicated terminology of a typical insurance policy, which causes them to make their insurance decisions based entirely on the price of their policy. Those customers that saved a few hundred dollars on their insurance package may have lost tens of thousands of dollars in the above situation.
Illinois Casualty Company takes industry standard policy language and tailors it to the needs of the hospitality Industry, thereby making ICC clients better-informed buyers of insurance better able to understand the total impact of insurance on their bottom line and profits.
For more information, please contact a selected hospitality insurance specialist who represents Illinois Casualty Company and supports the MRA.
By: Roy Reichold
Special to The Missouri Restaurant
Roy Reichold is a Senior Risk Advisor with Lakenan in St. Louis. Illinois Casualty Company is the endorsed property and casualty insurance carrier of the Missouri Restaurant Association.