Commercial Property Revised Commercial Property Utility Services – Time Element Waiting Period Options
CP 15 45 09 17
August 31, 2017
Summary:
Utility Services—Time Element CP 15 45, is necessary if coverage is desired for loss of business income and/or extra expenses caused by the interruption of service to the described premises resulting from direct physical loss or damage by a covered cause to the appropriate utility services selected. This welcome revision to CP 15 45 10 12 Utility Services – Time Element CP 15 45 09 17will enable selection of an independent waiting period for business income losses arising from utility services interruption, and this independent waiting period can be different from the policy's waiting period. This will provide a flexible approach for underwriting and managing the utility services exposure. The flexible waiting period is an important feature since the time element business income exposure is very different from the physical damage and attendant restoration of property at the insured premises, which begins at the period of restoration.
Under the Rules revision for this endorsement, the waiting period options will range from no waiting period in increments up to 168 hours (one week).
For example, a policy is effective 1/1; however the insured's peak business period begins 4/1 and they are dependent upon having electrical power to their operations. They cannot afford to be out of electrical power more than two days to sustain operations; therefore, with this endorsement they can select a 24 hour waiting period for business income losses from utility interruption, instead of the 72 hour waiting period for all other business income losses.
Topics Covered:
Utility Services – Time Element CP 15 45
Over the years, endorsement CP 15 45 Utility Services – Time Element has been revised several times with respect to the waiting period options for time element losses arising out of an interruption in utility service. In the 1995 edition of the underlying time element policy forms (CP 00 30 and CP 00 32), a 72-hour waiting period was introduced by means of a period of restoration definition, and the 1995 edition of CP 45 was revised to remove reference to the (12-hour) waiting period, thereby conveying that the new 72-hour waiting period would flow through to the utility services coverage granted under CP 15 45. Options available under the underlying time element policy forms can be written with no waiting period or a 24-hour waiting period, in lieu of the 72-hour waiting period.
With this revised edition of CP 15 45 09 17, the utility service – time element waiting period will no longer be bound by the same date as the underlying time element policy forms (CP 00 30 and CP 00 32), but will instead have an independent waiting period for business income losses arising from utility services interruption. This change will permit flexibility in underwriting and managing the utility services exposure, and it will also allow the waiting period to be expressed in terms that will more explicitly fit the scenario of a utility services interruption.
The accompanying Rules revision will provide rating for waiting period options under the endorsement of no waiting period, 12 hours, 24 hours, 48 hours, 72 hours, 96 hours, 120 hours, 144 hours or 168 hours (one week).
A. Coverage – Your coverage for Business Income and/or Extra Expense, as provided and limited in the applicable Coverage Form, is extended to apply to a “suspension” of “operations” at the described premises caused by an interruption in utility service to that premises. The interruption in utility service must result from direct physical loss or damage by a Covered Cause of Loss (as provided under the applicable Causes of Loss form indicated in the Schedule) to the property described in Paragraph E. if such property is indicated by an “X” in the Schedule.
B.Waiting Period – If a Business Income Waiting Period is indicated in the Schedule, such waiting period begins at the time of interruption of utility service to the described premises.
C.Duration of Coverage – Coverage under this endorsement applies to loss sustained and expense incurred during the period of time that:
Begins:
a. Following expiration of the waiting period indicated in the Schedule, for Business Income; or
b. At the time of interruption of utility service to the described premises, for Extra Expense (and for Business Income, if a Business Income Waiting Period does not apply); and
Ends when:
a. “Operations” are fully resumed by any means; or
b. “Operations” could be fully resumed by any means; or
whichever occurs first.
The expiration date of this policy will not cut short the duration of coverage under this endorsement.
The “period of restoration” definition in the Coverage Form, or in any endorsement amending the Coverage Form, does not apply to the coverage provided under this endorsement.
D.Exception – Coverage under this endorsement does not apply to Business Income loss or Extra Expense related to interruption in utility service which causes loss or damage to electronic data, including destruction or corruption of electronic data. The term electronic data has the meaning set forth in the Coverage Form to which this endorsement applies.
E.Utility Services
1. Water Supply Property, meaning the following types of property supplying water to the described premises:
a. Pumping stations; and
b. Water mains.
2. Wastewater Removal Property, meaning a utility system for removing wastewater and sewage from the described premises, other than a system designed primarily for draining storm water. The utility property includes sewer mains, pumping stations and similar equipment for moving the effluent to a holding, treatment for moving the effluent to a holding, treatment or disposal facility, and includes such facilities.
Coverage under this endorsement does not apply to interruption in service caused by or resulting from a discharge of water or sewage due to heavy rainfall or flooding.
3. Communication Supply Property, meaning property supplying communication services, including telephone, radio, microwave or television services, to the described premises, such as:
a. Communication transmission lines, including optic fiber transmission lines;
b. Coaxial cables; and
c. Microwave radio relays except satellites.
4. Power Supply Property, meaning the following types of property supplying electricity, steam or gas to the described premises.
a. Utility generating plants;
b. Switching stations;
c. Substations;
d. Transformers; and
e. Transmission lines.
It does not include overhead transmission lines unless indicated by an “X” in the Schedule.
F. As used in this endorsement, the term transmission lines includes all lines which serve to transmit communication service or power, including lines which may be identified as distribution lines.
G. The Coinsurance Additional Condition does not apply to this endorsement.
H. The Utility Services Limit Of Insurance, as shown in the Schedule, is the only Limit which applies to the coverage provided under this endorsement, and is part of, not in addition to, the Limit Of Insurance stated in the Declarations as applicable to the described premises.
Analysis:
The current ISO business interruption coverage forms have a waiting period of 72 hours before losses can be covered. Because the exposures of utility operation interruptions are markedly different from the physical damage and attendant restoration of property at the insured premises, more flexibility was needed to accommodate the utility service exposures. This revised endorsement will enable selection of an independent waiting period for business income losses arising from utility services interruption, and this independent waiting period can be different from the policy's waiting period.