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Off Premise Power Failure Protection, Are You Covered?

March 22nd, 2018

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With the fourth Nor’easter in 15 days hitting the east coast and more rain pounding a west coast threatened by mudslides, the chance of an off premise power failure is not a matter of if but when. An interruption of this type, that is beyond your control, can force your business to shut down and cause you to lose income and/or incur extra expenses.

Is your business protected against income losses if an off-premises/utility service interruption outage occurs? Don’t wait until the unthinkable happens to find out.

Off-Premise Power Failure Coverage

If a storm damages a substation owned by the local electric utility, it could cause your facility to lose power. For food service and restaurants, no power means your refrigerated items spoil and you may be forced to close your doors.

Without proper insurance in place, the accompanying business income and property loss due to the outage, i.e., spoilage, would be left uncovered.

This coverage is not typically provided in most commercial property insurance policies, but can be added by endorsement to bridge the gap and can include coverage for both direct physical damage and loss of income. It is important to note that this coverage must be purchased in addition to an existing policy in most cases. Some carriers offer limited Off Premises coverage on a limited basis as part of a coverage extension form.

For the policy to apply, your broker must understand your business needs and properly define the utilities to cover, as options vary and coverage is limited by your selections:

  • Water Supply – pumping stations and water mains
  • Communication Supply – radio, telephone, televisions, microwave services, satellite dishes and overhead transmission lines.
  • Power Supply – substations, generating plants, switching stations, transformers, etc.

Claim Example

Hurricane Harvey struck the Gulf Coast of Texas this past Fall, and slowly worked its way through the state over a period of many days. While the primary causation of the power outage was a named windstorm, the results were devastating. Utility providers were overwhelmed by the damage to the grid, which resulted in utility outage measured in weeks.

This example illustrates several areas of potential gaps in coverage:

  • Named Windstorm Coverage
  • Storm Surge and Flood
  • Off Premises Utility Failure

In most cases, your business income, extra expenses and any resulting damage associated with the interruption of your business due to the off-premises failure would be uncovered if you don’t have this specialized policy in place.

For food service and restaurants, if you have this particular extension, resulting spoilage may be covered. But if you do not have this extension, then any spoilage caused by the off-premises failure may be uncovered. Depending on how much of your inventory is temperature controlled, your losses could be extensive.

A thorough review of your coverage should be done annually to ensure you avoid financial heartache due to an event that could otherwise not be avoided.

Are you unsure of what your policy covers? As Sr. Vice President of our North American Restaurant Program, Hugh Scott works extensively with business owners to analyze and discuss different coverages and policies that best serve the food service and restaurant industry.

Ask yourself – is it is time to review your policy?

At Brown & Brown, we provide comprehensive coverage reviews. Now is the time to verify your business and personal assets are properly insured.

Contact us today for information on different coverages, endorsements and how they benefit your business through commercial business insurance, and also employee benefits. We also offer a suite of personal lines solutions.

Hugh Scott

Sr. Vice President, North American Restaurant Program

Hugh leads our North American Restaurant Program and specializes in multi-state, multi-location franchised and non-franchise restaurant owners.


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