ADJUSTERSINTERNATIONAL.COM 5 Regarding coverage under the civil authority clause of business income policies: (1) Is the length of time given for the coverage long enough? (2) Are there potentially severe exposures not covered by this clause? If so, how can they be insured? ANSWER: Just about everyone learned in 2020 that the civil authority provision of business income insurance does not apply to public lockdowns with no direct connection to physical damage by insured perils. The COVID-19 pandemic revealed that, indeed, there are very severe exposures not covered under the civil authority clause. In the case of infectious diseases, it’s not at all likely that their effects can be covered under property insurance policies since insureds and their carriers have almost no control over how diseases spread. In general, a civil authority clause cannot create a new insured peril but only extend coverage for physical damage by perils already insured under a policy. For the most part, property insurance addresses perils that are generally short in duration — fires, windstorms, riots, etc. — and whose damage can be addressed immediately after an event. Perils whose impacts can last indefinitely — floods, earthquakes, war, etc. — are generally excluded from coverage. Income coverage for civil authority follows this logic. Given that logic, it’s not surprising that standard business income coverage is limited to three consecutive weeks beginning 72 hours after a loss occurs. The three-week standard is actually an extension over the two weeks previously covered and the trigger of coverage is no longer limited to damage at property “adjacent to” an insured location. Current civil authority clauses generally apply to loss or damage “other than at the described premises,” although proprietary policies may limit the application of civil authority coverage to within a defined radius of the insured location. Business income underwriting rules generally do not provide for extending the time limit beyond the standard three weeks. This suggests that carriers seek to avoid open-ended exposure for public decisions they cannot control during prolonged While inflation has been creeping rather than galloping for some time now, it is still good to anticipate changes in rates of inflation, especially in different sectors of the economy.
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