1. Forms
2. EB
3. EB-99-70

Form EB 99 70: Utility Interruption Coverage

Form EB 99 70, Utility Interruption Coverage, is an endorsement to the standard Equipment Breakdown Protection Coverage Form (like the EB 00 20). Its primary purpose is to provide coverage for financial losses when utility services (such as electricity, steam, water, or communication services) are interrupted due to a breakdown of equipment owned and operated by the utility supplier. This form essentially extends the equipment breakdown policy to cover failures that occur off-premises at the utility provider but directly impact the insured's operations. The interruption must be a direct result of a "breakdown" (as defined in the main policy) of the utility's equipment.

Classes of Business It Applies To

This endorsement is crucial for businesses that heavily rely on uninterrupted utility services for their daily operations and could suffer significant financial loss if those services fail. Examples include:

• Manufacturing Plants: Operations often depend on a consistent power supply for machinery. A power outage due to a utility equipment breakdown can halt production, leading to business income loss and extra expenses.
• Healthcare Facilities (Hospitals, Clinics): These facilities require constant power for life-saving equipment, refrigeration of medicines and blood, and maintaining patient care environments. Interruption can lead to spoilage of critical supplies and impact patient safety.
• Businesses with Perishable Goods: This includes grocery stores, restaurants, food wholesalers, and refrigerated warehouses. A power outage can lead to spoilage of temperature-sensitive stock if backup systems are insufficient or fail.
• Data Centers and Telecommunication Dependent Businesses: Interruption of power or communication services can lead to data loss, service disruptions for their clients, and significant business income loss.
• Hospitality (Hotels): Power, water, and communication services are essential for guest services. An outage can lead to lost revenue from cancellations and an inability to operate.
• Retail Stores: Many rely on electricity for lighting, point-of-sale systems, and security.

Special Considerations

There are several important factors to consider when evaluating the need for and application of Form EB 99 70:

• Covered Cause of Loss at Utility: Coverage typically applies only if the utility interruption is due to a "breakdown" of the utility's equipment – the same types of perils covered for the insured's own equipment under the base policy (e.g., mechanical failure, electrical arcing). Some policies may have broader triggers, covering all causes of loss at the utility, but this is less common for a standard EB endorsement.
• Waiting Period: Policies often include a waiting period (e.g., a certain number of consecutive hours) before coverage kicks in. However, some endorsements may waive this for certain losses, like perishable goods. Once the waiting period is met, coverage may apply from the initial time of interruption.
• Relationship to EB 00 20: This form amends the EB 00 20 (or a similar base equipment breakdown policy). It does not stand alone. The definitions, conditions, and exclusions of the base policy will apply unless specifically modified by the EB 99 70.
• Direct Damage vs. Time Element: Utility interruption can cause direct physical damage to the insured's property (e.g., a power surge damaging equipment when power is restored) or time element losses (business income and extra expense). This endorsement typically addresses these indirect losses stemming from the utility service failure.
• Excluded Causes: The endorsement may contain specific exclusions, such as acts of sabotage or deliberate acts of load-shedding by the utility. It's also important to note that standard property policies often exclude utility service interruption originating off-premises, making this endorsement necessary.
• Backup Systems: The presence and reliability of an insured’s backup power or other utility systems can influence the need for this coverage and the potential exposure. Businesses with robust backup systems might have a lower risk of loss.

Key Information for Agents and Underwriters

Agents and underwriters should focus on the following when discussing, placing, or underwriting this coverage:

• Risk Assessment: Thoroughly evaluate the insured's dependency on each utility service. What are the critical utilities? What would be the financial impact of an interruption of each (e.g., spoilage, lost production, inability to conduct business)? Consider the reliability of local utility providers and the insured's history of service interruptions.
• Coverage Gaps: Standard commercial property policies often exclude losses due to off-premises utility service failure. This endorsement helps fill that critical gap. It's important to differentiate this from Utility Services - Direct Damage (CP 04 17) or Time Element endorsements on a property policy, which might cover interruptions from perils like windstorm or fire at the utility, but not necessarily a "breakdown" of utility equipment.
• Limit Adequacy: Ensure the limits of insurance are sufficient to cover potential business income loss, extra expenses, and any spoilage damage during a prolonged outage. This requires a careful analysis of the insured's financials and operational vulnerabilities.
• Underwriting Guidelines:
  • Nature of Utility's Equipment: While not directly under the insured's control, the type and age of the utility's infrastructure in the area can be an indirect risk factor.
  • Perishable Goods Exposure: For businesses with significant perishable stock, assess the value of goods, the temperature sensitivity, and the availability/reliability of on-site backup refrigeration and power. Some policies may require the insured to maintain a refrigeration or service agreement.
  • Contingency Planning: Does the insured have a documented contingency or disaster recovery plan that addresses utility interruptions? This can demonstrate risk mitigation efforts.
  • Loss History: Review any past losses due to utility interruptions, even if not covered by previous insurance.
• Pricing: The premium for this endorsement will depend on the limits chosen, the nature of the insured's operations, their dependency on utilities, and the perceived risk of interruption. Businesses with high perishables exposure or critical manufacturing processes may see higher premiums.
• Clarity on Triggers: Emphasize to the insured that coverage is typically for "breakdown" of utility equipment, not necessarily all causes of utility failure (e.g., widespread blackouts due to storms, unless that storm causes a breakdown of covered utility equipment).