Power Outage Closed My Shop
The situation: The power went out for two days because of a substation problem. My building wasn't damaged, but I lost sales and my fridge stock spoiled. Is that covered?
Quick Answer
Often not without the right endorsement. Business income coverage typically needs physical damage at your property, and many business property policies limit coverage for power failures that start off-site. A utility services endorsement is designed for this. With it, spoiled stock and lost income may be covered, subject to its limit and waiting period.
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What Happened
A storm damaged the substation serving Elena's café. Her building was fine, but the power was out for 48 hours. She lost $3,500 of refrigerated stock and two days of sales. Her business owners policy had a utility services endorsement with a 24-hour waiting period, so the spoiled stock and the second day's lost income were covered, up to the endorsement's limit.
Likely Relevant Policies
- Business Owners Policy (BOP)
- Commercial Property Insurance
Potential Coverages
Utility services endorsement High likelihood
Designed for off-premises utility interruptions; covers what the endorsement lists, subject to its limit and waiting period.
Business income coverage Low likelihood
Usually requires direct physical damage at the premises from a covered cause.
Spoilage coverage Possible likelihood
Some policies offer spoilage coverage for refrigerated stock.
Possible Exclusions
- Power failure that starts away from the premises is often excluded or limited without an endorsement.
- Waiting periods mean the first hours of an outage are often not covered.
Questions That Determine Coverage
- Did the outage start on or off your property?
- Does your policy have a utility services or spoilage endorsement?
- What is the waiting period?
- Was any of your own property physically damaged?
Recommended Immediate Actions
- Note when the power went out and came back.
- Photograph spoiled stock before throwing it away.
- List the spoiled items with their cost.
- Keep sales records from comparable days.
- Ask your utility for an outage report.
Documents to Collect
- Photos of spoiled stock
- Invoices for the stock
- Sales records
- Utility outage confirmation
Common Claim Process
Report the loss to your insurer and ask which coverage applies. If you have a utility services endorsement, the insurer will check the outage cause, the waiting period and your documented losses.
Potential Outcomes
- With the endorsement: spoilage and income after the waiting period, up to its limit.
- Without it: often no coverage, since nothing at the premises was damaged.
- Partial payment if the outage only slightly exceeded the waiting period.
Risk Prevention Tips
- Ask your agent about utility services and spoilage coverage.
- Consider a backup generator for refrigeration.
- Keep an up-to-date stock list.
Frequently Asked Questions
Does business interruption cover a power outage?
Generally only if there's physical damage at your premises, or if you have a utility services endorsement.
What if lightning damaged my own wiring?
That's on-premises damage, which business property coverage may cover.
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The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- Let's get down to business: lightning can wreak havoc on your bottom lineInsurance Information Institute (Triple-I)
- Insuring your business: property insuranceInsurance Information Institute (Triple-I)
Educational information, not advice: This scenario describes how a loss like this commonly goes, not how your claim will be decided. Coverage depends on your policy's wording, limits and deductibles, your state, and the facts. Confirm specifics with your insurer.