1. Forms
2. CP
3. CP-11-65

Utility Services - Time Element - Coverage C - Overhead Transmission Lines (CP 11 65 or similar, often related to CP 15 45)

What the form is:

This endorsement, or one similar in function like the CP 15 45 Utility Services – Time Element, extends a commercial property policy to cover the loss of business income and/or extra expenses an insured incurs due to an interruption of utility services. Specifically, this type of endorsement can be structured to address interruptions caused by damage to overhead transmission lines. Standard business income coverage is typically triggered by direct physical damage to the insured's premises. However, this endorsement provides coverage when the damage occurs off-premises to utility property, such as power stations, substations, and transmission lines, leading to a suspension of the insured's operations. It is important to note that coverage for overhead transmission lines often requires a specific selection and may involve an additional premium.

Classes of business it applies to:

This coverage is crucial for businesses heavily reliant on uninterrupted utility services, particularly electricity or communication services, where a disruption to overhead lines could halt operations. Examples include:

• Manufacturing facilities: Dependent on a consistent power supply for machinery and production lines. A downed overhead power line due to a storm could stop production, leading to significant income loss.
• Restaurants and grocery stores: Rely on electricity for refrigeration, cooking, and point-of-sale systems. Spoilage of perishable goods due to a power outage caused by damage to overhead lines is a major risk.
• IT companies and data centers: Require constant power and communication services. Interruption of these services due to damaged overhead lines can lead to data loss, service disruptions for their clients, and substantial financial impact.
• Retail stores: Need power for lighting, security systems, and payment processing. An outage can force closure and result in lost sales.
• Hotels and hospitality businesses: Depend on utilities for guest comfort and safety (HVAC, lighting, electronic key systems). An extended outage from damaged overhead lines, especially during peak seasons, can be financially devastating.

Special considerations:

• Covered Cause of Loss: The interruption of utility service must result from direct physical loss or damage by a Covered Cause of Loss (as defined in the policy) to the utility's property. For instance, if a windstorm (a covered peril) damages overhead power lines leading to an outage at the insured's premises, the resulting business income loss may be covered. However, if the outage is due to a flood and flood is an excluded peril, there would likely be no coverage.
• Overhead Transmission Lines Option: It's critical to specifically include coverage for overhead transmission lines if this exposure is a concern, as it's often an optional addition and may not be automatically included. Insurers may have different interpretations of what constitutes "transmission lines" versus local distribution lines, so clarity on this definition is important.
• Waiting Period: Most Utility Services – Time Element endorsements include a waiting period (e.g., 72 hours) before coverage for business income loss begins. This means the insured must absorb the initial period of loss. Some insurers might offer options to reduce or eliminate this waiting period.
• Electronic Data: Loss or damage to electronic data resulting from a utility service interruption is often excluded, even with this endorsement.
• Limits of Insurance: The coverage provided by this endorsement is typically subject to a specific limit of insurance shown in the schedule, which is part of, and does not add to, the overall Business Income limit of insurance.
• Policy Language Variation: Endorsement terms and conditions can vary significantly between insurers. It's essential to carefully review the specific policy language.

Key information for agents and underwriters:

• Risk Assessment: Underwriters need to assess the insured's dependency on utilities and the vulnerability of the supplying overhead lines. Factors include the reliability of the local utility grid, exposure to natural hazards like windstorms or ice storms that could damage overhead lines, and the potential length of outages.
• Pricing: Coverage for overhead transmission lines typically comes with an additional premium due to the increased exposure. The cost will reflect the perceived risk.
• Coverage Gaps: Agents should highlight potential coverage gaps, such as the waiting period and exclusions for electronic data. They should also discuss the importance of selecting adequate limits for this coverage based on the insured's potential loss of income and extra expenses during a utility outage.
• Defining "Transmission Lines": It's crucial for both agents and underwriters to have a clear understanding with the insurer about what is considered an "overhead transmission line" versus a local distribution line to avoid claim disputes. If the price difference is not prohibitive, opting to include overhead transmission line coverage can prevent such disputes.
• Alternative Coverages: For certain specific losses, like spoilage of perishable goods, other endorsements like Spoilage Coverage (e.g., CP 04 40) might offer broader coverage under certain circumstances, as they may not always require the power interruption to be caused by a peril covered under the main property policy.
• Documentation: In the event of a claim, clear documentation of the cause of the utility interruption, the damage to the utility's property (including overhead lines if covered), and the financial impact on the insured's business will be essential.