With many businesses essentially shuttered for two days, business interruption insurance could provide relief for some small business owners in Baton Rouge, but not others.
This week’s ice storm comes on the heels of local businesses discovering that, by and large, their policies didn’t help them recover from pandemic-related shutdowns. The good news this time, however, is that at least some business owners will be able to collect, standing in contrast to what they learned during the pandemic.
Whether a business is eligible for coverage largely depends on what’s causing the interruption, says Patrick Moore, chief marketing officer of BXS Insurance.
“If the business gets physically damaged because a tree falls on the building due to laden ice, or if a pipe were to burst, that’s typically covered,” Moore says. “If a business is interrupted because it doesn’t have power, that gets a little trickier.”
While property damage policies typically don’t cover off-site utility interruptions, a small business owner can endorse their policy to include utility or service interruption insurance. However, even that added coverage can be limiting, says Moore, noting it oftentimes excludes overhead transmission lines.
Furthermore, utility interruptions typically have a time element deductible attached to them, in which the coverage doesn’t kick in until the business has been interrupted for at least 72 hours.
Insurance companies may also consider whether a civil authority has banned road travel due to hazardous conditions. Mayor Sharon Weston Broome yesterday issued a parishwide curfew from 8 p.m. to 7 a.m., urging residents to stay off the roads in preparation for the nighttime freeze, which could potentially prevent some business owners with late-night operations from receiving coverage.
Broadly speaking, an establishment’s eligibility for business interruption coverage comes down to two factors, says local attorney Chris Jones, a partner at Keogh, Cox & Wilson. The first involves a policy’s specific language, and the second is whether the claim exceeds the deductible.
“All insurance policies are different, but usually the specific language will dictate whether there is coverage for a specific event or not, even though that’s supposed to be what business interruption insurance is for,” Jones says. “But oftentimes, it’s not worth it to make a claim because it’ll not exceed the deductible.”
As a general rule of thumb, Jones says all business owners should examine their policies to determine whether they’re eligible for coverage, as they can vary widely.
Regardless of all the potential exceptions, Moore says some businesses should still be able to collect.
“It’s generally available if they have an endorsement for off-site utilities interruption and if the interruption, like a power outage, lasts more than three days, or if they get physical damage because of a tree falling or water pipe bursting,” Moore says. “You have to read the fine print.”