Every December, the Nantucket Chamber of Commerce holds its annual Nantucket Christmas Stroll, kicking off the holiday season with the celebratory Tree Lighting on Main Street, a visit by Santa Claus, and lots of live entertainment. It’s a total blast.
Last year’s Stroll, however, faced an unexpected challenge – an underground cable failed and left large swaths of downtown without power during the Stroll. The unfortunate timing of this outage resulted in substantial losses for affected businesses. Nantucket’s Chamber of Commerce says the outage negatively affected more than 200 chamber member businesses, with millions lost in both expected revenue and employee gratuities.
SMW heard all about it when one of our clients called to find out if their insurance coverage might help cover their losses relating to the power outage. Here’s how we assessed the situation for our client:
The first key question to ask is: why did the power go out? This question is critical, because to get payment from the insurance carrier, the damage must stem from a covered cause of loss.
The next question relates to timing. In most commercial insurance policies, the Business Interruption coverage contains “time deductible” language that limits recovery to damage that occurs after a certain period of time has lapsed – usually 72 hours, sometimes less. So, even if the damage stems from an otherwise covered cause of loss, the business can only recover for damages that occurred after the 72-hour clock has expired.
This time deductible can be costly for businesses. Even one day of lost revenue can be crippling on busy, high-revenue days. For this reason, SMW advises our business clients to get a “utility endorsement” for their BI coverage. This endorsement ensures that they will still have coverage if the power goes out for a day or some other short-term outage occurs.
The Nantucket outage apparently stems from underground power cables – not a fire or an explosion. So, most businesses probably do not have coverage UNLESS they have a utility endorsement in their BI coverage.
When SMW gets an inquiry, even from a business who is not a client at the time, we really do our best to help. We examine the policy closely and see if there might be ways to garner coverage. If the situation is unlikely to get covered, we make sure the business understands what steps they can take in the future. Many business owners do not fully understand the various impacts they might face when they buy insurance. SMW does not sell insurance, so we advise all business owners on what they can do to protect themselves. Talk to your local insurance agent, and – in this case – make sure you have a utility endorsement in your BI coverage.
