When the Lights Go Out: Managing Service Interruption Claims
If you lost power during Hurricane Matthew, you weren’t alone: US utilities reported more than 2 million customers were without electricity at some point. Tens of thousands were in the dark for several days. And with flooding expected to continue in some areas more than a week after the storm’s retreat, some businesses face long-term interruptions to their operations.
You should anticipate losing electricity in a powerful storm such as Matthew. Hurricane-force winds and floodwaters can topple transmission and distribution (power) lines, damage substations, and otherwise disrupt service.
So along with initiating business continuity plans and taking emergency measures to cope with the loss of power — for example, batteries, backup generators, and evacuation plans — it’s important to understand your insurance policy requirements including those related to service interruption. When power is out for an extended time — typically 24 hours, although individual policies may differ — some costs may be eligible to be added to your claim. These include costs for temporary power or losses from the loss of power, known as service interruption property damage, or losses directly arising from extra expense or business interruption, known as service interruption time element. Coverage can apply not only to loss of electrical power but also to other utilities like gas, water, garbage removal, and telecom service.
To be able to make a claim for service interruption, there must be a covered event — for example, property damage to a utility that supplies the insured’s location — in the policy.
Document the Interruption
Service interruption claims require unique documentation. Among the key areas are:
- Waiting period: Make a precise timeline of your service interruption. Most service interruption coverage requires a waiting period. In other words, the service must be interrupted for a minimum time — typically 24 to 48 hours — before coverage will respond.
- Notice to the utility: Many policies require that the insured notify the utility of the interruption. If this requirement exists, be sure to document the notification.
- Overhead transmission and distribution lines: Many policies exclude losses arising from overhead lines. As soon as possible and keeping safety in mind, identify and document the true nature of your service interruption. What type of equipment was damaged? What was the cause of damage? How far was it from your premises?
- Distance limitations: Many service interruption coverage grants have limitations that say the cause of loss must be within a certain number of miles or feet of the premises. It’s important to document that information early on.
Regaining power and other services is a critical step in recovering from a natural disaster. Working with your insurance advisors can help your claims proceed as quickly and efficiently as possible.