Power Outages & Surges

David Surles, IIAT Insurance Agency

Extreme temperatures across Texas in the last few weeks have caused power companies to implement rolling blackouts in some areas. Loss of power can result in loss of temperature-sensitive products (such as food or medicine), and surges of power when the electricity is restored can damage electronic equipment and appliances. These types of losses are excluded in the unendorsed ISO commercial property and business owners policies by the Utility Services exclusion, but coverage is available when the proper endorsements or coverage options are made available by the insurer, sold by the agent, and purchased by the insured. For losses to temperature-sensitive products, endorsement CP 04 17 (Utility Services - Direct Damage) provides coverage for direct damage (such as spoilage of perishable goods) caused by interruption in utility service to the described premises when caused by a covered cause of loss. This coverage option won't work for rolling blackouts implemented by the power company, since such decisions are also excluded by the policy. A better option for businesses that process, store or sell perishable goods is endorsement CP 04 40 (Spoilage Coverage). In addition to covering losses caused by on- or off-premises power outages, this form covers losses caused by mechanical breakdown or failure of on-premises refrigerating equipment and contamination by the refrigerant. Damage to electronic equipment caused by power surges may be available on equipment breakdown coverage options on some policies or separate equipment breakdown policies.