Winter Storm Juno requires consideration of BI coverage, says expert

Out-Law Analysis | 27 Jan 2015 | 4:56 pm | 1 min. read

FOCUS: Much of the north east coast of the US was locked down yesterday as result of winter storm Juno.

Whilst the storm’s impact may have been less serious than at first feared, property owners and their insurers would have been dusting down their insurance policy wordings again, with a view to checking, in particular, the coverage available for business interruption losses arising from the storm.  

The level of physical damage to property was always unlikely to reach the levels seen after Hurricane Sandy in 2012, so the main question was likely to be whether insurers were liable for losses to policyholders purely for their economic losses. 

The expected storm caused an emergency to be declared in New York, New Jersey, Connecticut, Rhode Island, Massachusetts and New Hampshire with some 60 million people potentially affected across 12 states in total. Considerable measures were taken in New York and Boston, with all non-emergency vehicles banned from the roads together with the suspension of subway services. Around 7,000 flights were cancelled, with businesses and schools closing early on Monday in order to prepare for the impact of the storm. 

Bearing in mind the potential disruption that Juno could have caused, businesses with insurance and insurers should consider their positions as regards business interruption (BI) and contingent business interruption (CBI) coverage. BI is generally added on to property policies and covers lost profits arising out of damage to the insured’s covered property, whilst CBI covers loss of profits resulting from damage to the insured’s supply chain.

A key issue for insureds and insurers is whether policies cover losses caused by those measures taken by governmental organisations or only cover interruption losses caused by actual physical damage arising from the storm itself. 

Generally, BI and CBI coverage begins after a period of time, normally 72 hours, following an event and continues until the damaged or destroyed property is reinstated. As it looks to be the case that businesses are up and running within a short period of time, the ability for insureds to claim, and the resulting impact upon insurers, may be much more limited than in the case of Sandy.

Stephen Kilner is an insurance specialist at Pinsent Masons, the law firm behind Out-Law.com