An abnormally dry winter left Colorado’s snowpack at less than 70 percent of average this year. That, in turn, has prompted warnings that the state could be in for its worst wildfire year since the historic fire seasons of 2012 and 2013.
If you own a business, you know that in case of a fire-related loss, your property insurance policy will cover you.
And if a wildfire forces you to shut down the business temporarily, a Business Interruption policy will help cover the business for its loss of profits until the property damages are repaired and the business resumes to its normal operations.
But what if the flames never touch your business? What if, instead, you’re forced to close and neither you nor your customers can get to your place of business because the police or fire department orders a mandatory evacuation?
For that, there’s Civil Authority and Ingress/Egress coverage.
As their names might suggest, these policies cover the business owner for loss of income due to interruptions caused by the actions of a civil authority – provided that the actions of the civil authority are in response to a covered peril, e.g., a wildfire.
Evacuations were ordered during the 2013 Black Forest Fire in El Paso County, which destroyed nearly 500 homes, the most by a wildfire in state history. The previous year, the Waldo Canyon Fire also destroyed hundreds of homes and prompted evacuations.
Both fires displaced hundreds of businesses and their employees. But only those with a civil authority enhancement in their property insurance policies would have been compensated for losses arising from the government’s order to evacuate.
These policies do come with certain limitations. Among them: a stipulation that the maximum period that can be collected is limited to 15-30 days, typically after waiting periods between 24-72 hours.
Also, courts have held that access to the premises must be completely prohibited and not just impaired or limited for coverage to apply.
It’s also important to understand that civil authority coverage will only apply if the evacuation was caused by a loss that is otherwise covered under the property policy.
For example, after the terrorist attacks of Sept. 11, 2001, there were numerous claims filed by businesses that were dependent on airports staying open. After the federal government suspended air travel for an extended period, many of these businesses filed business income claims. Their claims, however, were denied because the closure of the airports did not take place after any covered losses to those facilities.
As a risk control strategy, civil authority coverage can make good sense, especially if your business is in areas prone to wildfires or flooding, whether in Colorado or anywhere else in the country.
Like so much about insurance, whether it’s for your business or personal life, the nuances can be tricky. Don’t hesitate to reach out to us with any questions you might have.
Julie Greenamyre, JD, is a CCIG Claims Advocate. Reach her at 720-330-7938 or JulieG@thinkccig.com.
CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of risk with our risk and claims management expertise and a commitment to service excellence.
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