The Connection Between Physical Damage and Business Interruption Coverage[dagger]

• Published in: FDCC quarterly 2004-07, Vol.54 (4), p.307
• Main Authors: Downs, Andrew B, Bolduan, Linda M
• Format: Article
• Language: English
• Subjects: Business income; Business interruption insurance; Business operations; Damage claims; Denials; Hurricanes; Insurance coverage; Insurance policies; Language; Snow; Studies; Theater; Water mains
• ISSN: 1544-9947

Insureds facing loss from events such as natural disasters, civil disturbances or terrorism may seek coverage under business interruption insurance policies or under the "Civil Authority" provisions generally found in such policies. Those provisions typically cover losses resulting from prohibited access to covered property due to other property damage. Insureds, however, have become more assertive in presenting access claims arising out of events much more distant and remote than those traditionally envisioned in underwriting business interruption exposures. Given that trend, this article explores the connection required between covered physical damage and coverage for business interruption or denial of access caused by the action of civil authorities. As a general proposition, the "physical damage" requirement is still alive and well, though it may be tested in pending cases arising out of September 11, 2001 or recent natural disasters, such as the California fires.