Coverage for Utility Services

A commercial property insurance policy covers most direct losses to a business’s structures, equipment, and related property. However, what happens when weather conditions turn mean and cause indirect damage by knocking out utility services? The property could be harmed by heat-induced transformer breakdowns. This form of power interruption affecting compressors, motors, and switches, at a business could result in food spoilage or damage to climate-sensitive property. Equipment damage may also occur due to an accidental, sudden loss of power. Power surges may harm expensive equipment. Commercial property policies often exclude coverage for loss that involves the failure of utility services. Therefore, a business is vulnerable to utility failure or interruption of any type that occurs away from its business location.

Fortunately, optional coverage is available to protect against utility service-related losses, and a business only needs to buy the type of coverage it needs, such as services for water, telephone/communications (either including or not including landlines), gas, and electric power. Commercial insureds also have the option to protect different classes of property, what business locations to insure, type of property (the firm’s property and property that belongs to others, such as customers), and the sources (perils) of loss covered.

Such coverage forms usually define the utility services; perhaps using language similar to the following:

• Water Supply Services are the pumping stations and water mains that supply the covered premises.
• Communication Supply Services refers to telephone, radio, microwave, or television services that are included as covered property, but coverage is not limited to only that property. The only specifically excluded communication property is a satellite. Overhead transmission lines may be included or excluded, depending on how the schedule is completed.
• Power Supply Services means five specific types of property used to supply electricity, steam, or gas to the scheduled property. The types of property are generating plants, switching stations, substations, transformers, and transmission lines. The transmission lines may be included or excluded, depending on how the schedule is completed.

If your business is concerned about its vulnerability to power-related loss, be sure to check with your Brown and Associates Insurance professional about this valuable coverage option.