Does Your Business Insurance Cover Losses from Hurricane Sandy?

“Superstorm Sandy has caused immense damage to the East Coast, with losses estimated in the tens of billions. Those affected face significant challenges as they begin the process of recovering from severe flood and wind damage, utility outages, impaired access, disrupted supply and customer chains, and extended business interruption.” (Pillsbury)

For businesses beginning the long process of recovery from the damage caused by Superstorm Sandy, a look at five hurricane-related losses that may be covered under typical insurance policies:

1. Property damage:

“Typically, first-party property policies provide broad coverage for damaged or lost property so long as the cause of damage is a ‘covered cause of loss.’ And, typically, modern first-party property policies include all risks of loss as covered causes, absent express policy language to the contrary. Although some businesses’ property policies may exclude or limit coverage for damage caused by floods, many policies contain broad flood coverage. Moreover, even if policies exclude coverage for floods, losses resulting from wind damage or other storm-related harms … still may be covered.” (Gilbert LLP)

2. Losses stemming from business interruption:

“Often more valuable than insurance for damaged property, commercial property insurance also may include a so-called ‘time-element’ provision for lost profits due to business interruption. This coverage is triggered when, in addition to suffering direct property damage, a policyholder’s ability to produce goods and services is interrupted or impaired.” (Orrick)

3. Expenses incurred while repairs are being made:

“A policy’s business interruption provision may also provide coverage for extra expenses. Extra expense insurance indemnifies the insured for costs in excess of normal operating expenses that the business incurs in order to continue operations while its damaged property is repaired or replaced. Such expenses typically include the cost to rent substitute facilities, move equipment and personal property, as well as overtime wages. Similarly, contingent extra expense insurance reimburses the insured for expenses that result from a contingent loss, such as a contingent business interruption loss.” (Perkins Coie)

4. Costs related to utility outages:

“When utility services to your premises are interrupted, service interruption coverage may be available to cover damage to property (e.g., spoilation of refrigerated goods) and your loss of income or extra expense… Service interruption coverage generally requires damage to the property of a utility supplier used by the insured and sometimes includes requirements that the damage occur within a specified distance of your property. Impounded water coverage applies in the event that water used as a raw material, for power, or in a manufacturing process becomes unavailable due to damage to dams or reservoirs. These coverages are often limited in duration and subject to waiting periods or deductibles.” (Proskauer)

5. Losses incurred when access to a business is blocked:

“[I]ngress and egress” coverage … generally covers the insured when access to a business premises or location is blocked for a time, [and] “civil authority” coverage … generally covers the insured for losses arising from an order of a governmental authority that interferes with normal business operations.” (K&L Gates)


Further reading on insurance coverage of Sandy-related losses:

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