Our office is insured on a non-standard BOP which covers business personal property and business income. In June the electrical substation of our office building had a breakdown in which three transformers were broken. The breakdown was repaired the next day, but another breakdown occurred during the night and we lost power again. It took until the end of the week before we could return to work.

But, as the day went on we began to have problems with our computer system. Our network switch broke down, and our technician brought another switch. Later that day we had systems problems again. Our technician found our exchange server software was damaged and he had to reinstall the entire program. We substituted a server I had while the technician worked on our office server.

I submitted a claim to our BOP insurer for a business income loss. The insurer denied it based on exclusion 2.A. electrical apparatus—artificially generated electric current, including electric arcing, that disturbs electrical devices, appliances, or wires.

I also submitted a claim under our EDP form for the cost of reinstalling the program, and it was denied, stating that exclusion 5.E applied, which says that there is no coverage for loss, damage or expense caused directly or indirectly by…short circuit, blow-out, or other electrical disturbance, other than lightning, which damages electrical apparatus, unless fire or explosion ensues and then only for loss or damage caused by such ensuing fire or explosion."

Are these denials correct?

Puerto Rico Subscriber

We think that, in citing the exclusion for artificially generated electric current in the businessowners policy, it is up to the insurer to prove the exclusion applies. The BOP you have is a special causes of loss (open perils), and it is up to the insurer to prove an exclusion applies.

However, this form also contains an exclusion for computer-related and other virus and cyber-problems exclusion, which is extremely broad. Although the insurer did not cite it, it would appear to close the door so far as making a case for business income coverage.

As regards the EDP form, normally this coverage would close any gap left in the BOP form. For example, the AAIS EDP coverage form includes coverage for both electrical supply disturbance and mechanical breakdown. But this particular form, unlike standard forms, contains an exclusion for mechanical failure that might prove to be a problem.

But with both forms, we believe that the insurers must prove exclusions apply rather than simply citing them.