A commercial account with the three types of coverage discussed in this article is likely to have three different business income coverage grants; one each for standard BI-EE coverage, equipment breakdown coverage and cyber insurance. Of these coverage grants, two of them— equipment breakdown and cyber — technically apply only to the portion of income lost due to an equipment accident, system disruption or other specified loss.
Thus, when confronted with an income loss covered under two or more policies it must be determined what portion of the lost income should be assigned to which policy. This is made more daunting by the fact that there is precedent, upheld at times in litigation, for an insurer to deny coverage for an income loss on the basis that circumstances would have prevented an insured from earning income anyway.
In one case, a court upheld a denial of income coverage for an insured that had to close to repair a floor damaged by an insured peril. By chance, the repairs were done during and immediately after a blizzard, and the insurer denied coverage on the basis that the business would not have earned income even if it was open; the court agreed.
This example raises a question: Can simultaneous losses trigger mutual denials of income coverage?
Suppose an insured’s operations are suspended due to physical damage by a covered property peril and the insured cannot fulfill orders until damaged property is repaired or replaced?
If there were simultaneous equipment and cyber losses, could the equipment and cyber insurers deny their shares of otherwise collectible income coverage on the basis of the concurrent property loss? Conversely, could the property carrier deny its share of income coverage for a period when an equipment or cyber loss would prevent resumption of operations?