Business Income and Mall Shootings

The shooting of innocent civilians at a shopping mall brought two quick questions to the VU “Ask an Expert” service. The entire mall was closed for two to three days during peak holiday season and one or more stores were closed for two weeks, not reopening until the week before Christmas. Does a business income policy respond to this business interruption?

A covered business income loss requires suspension of operations “caused by” damage to or loss of property at the described premises. This causal requirement is in ISO’s commercial property and business owners forms. Once we’ve determined that property at the premises (any property, not just covered property) has been damaged by a covered peril, we have to determine if the suspension arose from that damage in order for coverage to apply.

On the caveat that we don’t know all of the facts of this particular case, coverage may not apply. Was the suspension really necessary in order to repair any damage and clean up the facility, or was it done for psychological or other reasons unrelated to any direct physical loss?

It may very well have taken two to three days for repair, but there is an applicable 72-hour waiting period unless removed by endorsement. It may be more difficult to assert that a two-week suspension was required for damage remediation.

To read the complete analysis, click here.

Insuring Lawn Tractors Used Off Premises

The VU’s “Ask an Expert” service has probably had about a dozen questions dealing with coverage for lawn tractors operated off the residence premises—even if it is ridden just a few blocks to mow a nearby relative’s property or even adjacent non-owned land. With spring approaching, there will probably be another surge of questions on this topic.

Under ISO HO 2000program, liability coverage for the use of lawnmowers is provided only if the vehicle is used solely on the premises. Coverage vanishes forever once it is used off premises. In one court case, a homeowner was sued for $235,000 when he loaned a mower to a neighbor who was mowing his yard.

In addition to this coverage gap, there is no coverage for an otherwise covered vehicle if it is used for a business purpose. Many people hire a lawn service or a neighborhood teenager to mow their lawn. A literal interpretation of this exclusion leads one to believe that there is no coverage if the homeowner is sued.

To read more about this important issue, including statistics that indicate the potential loss exposure, click here.


Business Income and Ordinance or Law Coverage

An apartment building is located in an area where a building ordinance mandates a certain amount of parking space per unit. As a result, if the building was rebuilt at this location, it would have fewer units to allow space for more parking, thus resulting in a loss of rental income. Is there an Ordinance or Law endorsement that can solve this business income problem?

ISO’s CP 04 05–Ordinance or Law endorsement applies only to direct losses, not indirect business income losses. ISO does have a CP15 31–Ordinance or Law Extended Period of Restoration endorsement that will provide business income coverage to the extent that the period of restoration is increased due to complying with the new building code.

However, there is no endorsement to pay for the long-term loss of rent that arises from the enforcement of an ordinance or law after the property has been restored. The obvious “solution” is to relocate and rebuild the property so that rental income is not reduced, if that’s possible.

But there might be a few other alternatives.

To learn more, click here.

Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of the Virtual University, an online learning center for agents and brokers.