Guides
Utility service interruption coverage: when an outage is insured
The ISO special form excludes off-premises power, water and telecom failures. How the utility services endorsements buy coverage back and where they stop.
A standard commercial property policy does not pay for losses caused by a power, water, sewer or communications failure that starts away from your premises. To buy that coverage back you add a utility services endorsement, which pays only when a covered cause physically damages the utility's own property, such as a substation, a water main or a fiber line, and the damage cuts off service to you. A blackout from grid overload, a rolling outage or a precautionary shutoff typically does not qualify.
This guide follows the ISO forms, which most commercial and businessowners programs are built on. Carriers amend them, and manuscript wording varies, so read the endorsement schedule and the definitions in your own policy.
What the base policy says
The ISO Causes of Loss - Special Form, CP 10 30 (09 17 edition), carries a Utility Services exclusion, one of the clauses that apply regardless of any other cause that contributes "concurrently or in any sequence" to the loss (see anti-concurrent causation clauses: when one excluded cause sinks a claim). It excludes the failure of power, communication, water or other utility service supplied to the described premises, however caused, if the failure:
- originates away from the described premises; or
- originates at the described premises, but only if the failure involves equipment used to supply the utility service to the premises from a source away from them.
Four details in the wording matter:
- Capacity and reduction in supply count. The form says failure of any utility service includes lack of sufficient capacity and reduction in supply, so a brownout is treated like a blackout.
- Surges are excluded in a narrow case. Loss from a power surge is excluded if the surge would not have occurred but for an event causing a failure of power.
- Communications include the internet. The form says communication services include service relating to internet access or access to any electronic, cellular or satellite network.
- A fire that follows is still covered. If the failure or surge results in a Covered Cause of Loss, the policy pays for the loss caused by that cause. A power failure that leads to a fire is a fire loss.
The business income form is no better. The standard ISO form, CP 00 30, responds to a suspension of operations caused by direct physical loss or damage at your premises. A substation that fails five miles away has not damaged your property, so there is no trigger. For more on how time element coverage works, see business interruption insurance: how business income coverage works. The wider exclusion list is in commercial property exclusions: what the standard policy won't pay.
The two endorsements that buy it back
ISO publishes the coverage in two parts. Direct damage (CP 04 17) pays for damage to your property caused by the interruption of service. Time element (CP 15 45) pays for lost business income and extra expense. The businessowners program has matching forms, BP 04 56 (direct damage) and BP 04 57 (time element), and the text of those two shows how the pair works.
| Feature | Direct damage | Time element |
|---|---|---|
| What it pays | Loss of or damage to scheduled covered property caused by the interruption | Loss of business income or extra expense at the premises caused by the interruption |
| Trigger | Direct physical loss or damage by a Covered Cause of Loss to utility property you tick on the schedule | Same |
| Typical loss | Spoiled stock, frozen contents, ruined process batches | Lost sales and continuing expenses while the outage lasts |
| Electronic data | Excluded | Excluded |
| Limit | Shown on the schedule; in the businessowners form it is part of, not in addition to, the property limit | Shown on the schedule |
The schedule lists the utility property that triggers the coverage. In the ISO businessowners forms the choices are water supply property (pumping stations and water mains), communication supply property (transmission lines including optic fiber, coaxial cables and microwave radio relays, but not satellites), and power supply property (generating plants, switching stations, substations, transformers and transmission lines, covering electricity, steam or gas). The time element version adds wastewater removal property, a sewage system other than one designed primarily for draining storm water, and it excludes interruption caused by a discharge of water or sewage from heavy rainfall or flooding.
The overhead transmission lines switch
This is the line to read first. Both forms state that the communication and power definitions do not include overhead transmission lines unless the schedule says so, and the schedule asks for "Included" or "Not Included." Wind, ice and falling trees take down overhead lines more often than they destroy a substation. If the box says "Not Included," the endorsement may pay nothing for the most common storm outage. The forms define transmission lines to include lines identified as distribution lines.
Waiting periods
A time element claim starts with a deductible measured in hours. The 2017 revision of CP 15 45 kept the breadth of coverage and added waiting period options of 12, 48, 72, 96, 120, 144 and 168 hours to the existing choices of no waiting period and 24 hours, as the Independent Insurance Agents & Brokers of America's IA Magazine reported in October 2017. For comparison, the base business income form, CP 00 30 (10 12 edition), starts income loss after 72 hours. The utility endorsement has its own waiting period, so confirm which option the schedule selects.
What triggers it and what does not
The test is physical damage by a Covered Cause of Loss to the listed utility property. Whether the cause is covered depends on the causes of loss form attached, so read basic, broad and special causes of loss forms: what each covers with the endorsement.
| Event | Likely result |
|---|---|
| Tornado destroys a substation that feeds your plant | Triggers the endorsement if power supply property is scheduled |
| Ice storm brings down overhead lines | Responds only if overhead transmission lines are "Included" |
| Water main breaks in the street, and your building loses water | Responds if the break is physical damage by a covered cause to scheduled water supply property |
| Heat wave strains the grid and the utility imposes rolling outages | No physical damage to utility property, so no trigger |
| Utility cuts power as a wildfire precaution | No physical damage, so no trigger |
| Your own transformer on site fails | Not utility property; an equipment breakdown insurance: what it covers that property insurance does not question |
The California Public Utilities Commission describes a Public Safety Power Shutoff as a temporary, targeted cutoff of electricity that utilities use to lower the chance their equipment starts a fire, and treats it as a measure of last resort (CPUC). A business in California that loses power for days in one of these events generally has no utility services claim under the ISO endorsements, because nothing was damaged. See wildfire and commercial property insurance: cover, cost and mitigation for the other coverage questions around wildfire.
A hypothetical example
Say a food processor in the Midwest earns net income and continuing expenses of about $9,000 per day. A windstorm destroys a substation and the overhead lines that feed its plant, and power is out for six days. The policy has a time element utility endorsement with a $250,000 limit. These figures are invented to show the mechanics.
| Policy choice | Days paid | Recovery |
|---|---|---|
| Overhead lines "Included," 24-hour waiting period | 5 | $45,000 |
| Overhead lines "Included," 72-hour waiting period | 3 | $27,000 |
| Overhead lines "Not Included," lines caused the outage | 0 | $0 |
Two similar-looking policies produce a $45,000 recovery or none. The difference is entirely in the schedule. The same outage will also spoil perishables in the cooler, which is a separate question; see below.
The coverages that sit next to it
- Spoilage. Stock lost to a temperature change is dealt with by
CP 04 40or an equipment breakdown extension, with its own causes. spoilage coverage for refrigeration breakdown and power outage covers it. A utility endorsement and a spoilage endorsement with a power outage cause can sit together. - Equipment breakdown. Many equipment breakdown insurance: what it covers that property insurance does not forms include a utility interruption option, and it responds to a different trigger: a breakdown of the utility's equipment, not a weather event. Ask whether the limit is on the declarations or marked "included" with no amount.
- Civil authority. If officials close your area, civil authority coverage: when an order closes your doors responds only to damage to other property and an order that prohibits access, not to a power failure alone.
- Dependent properties. A supplier's failure is a contingent business interruption insurance and supply chain risk matter, and the dependent property forms do not treat utility providers as dependent properties.
- Cyber and cloud outages. The utility endorsements exclude electronic data, and an outage at a cloud provider is not a power or communications utility in this sense. See cyber business interruption and dependent system failure and System failure, cloud outages and the CrowdStrike lesson.
Buying checklist
- List the services that would stop you: electricity, gas, steam, water, sewer, telephone, internet. A restaurant depends on all of them, a warehouse mostly on power.
- Estimate daily income loss and the time a repair could take. The business income (interruption) limit calculator and how to calculate a business income limit help.
- Ask for the schedule to include each utility you rely on, including wastewater removal if the form offers it.
- Set overhead transmission lines to "Included."
- Choose the waiting period deliberately: a shorter one pays sooner and costs more premium.
- Set a limit on the schedule that fits the numbers in step 2 and confirm it is not just the property limit.
- Check what the policy says about electronic data, extra expense for a generator or temporary supply, and how the period of restoration ends.
Key takeaways
- The ISO special form excludes utility failures that start off your premises, including power, water and internet service, so a blackout is not a covered loss by default.
- Utility services endorsements (direct damage and time element) cover loss only when a covered cause physically damages the utility's own property.
- The schedule controls the result: which utilities are listed, whether overhead lines are included, the waiting period and the limit.
- Grid overload, rolling outages and precautionary shutoffs do not damage utility property and typically do not trigger the endorsements.
- Pair the endorsement with spoilage and equipment breakdown coverage, and size the limit from your daily income loss.