Street Closure, Waiting Period, and a Food-Truck Workaround
A restaurant has a BOP with $400,000 business income for 12 months, a 72-hour waiting period, and $50,000 extra expense. A fire in an adjacent building closes the only street access for 21 days. The restaurant remains physically undamaged but loses $18,000 per week in net income plus continuing fixed costs of $4,000 per week. The owner also pays $9,000 to rent a food truck to keep catering contracts. The policy includes civil authority coverage for up to 30 days and a utility services endorsement; the fire did not damage the restaurant's utilities. The owner submits a claim for 21 days of lost income plus extra expense.
1. Calculate the likely business income payment, including the waiting period and civil authority limit.
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Civil authority coverage typically pays business income when a civil authority prohibits access to the premises because of damage to nearby property from a covered peril. The fire next door is a covered peril, and the street closure is the civil authority action. The 72-hour waiting period applies, so the first three days are not paid; 21 days minus 3 days leaves 18 compensable days. Civil authority coverage is often capped at 30 days, so the 18 days fit within the limit. Net income is $18,000 per week, or $2,571.43 per day; 18 days equals $46,285.71. Continuing fixed costs should not be added automatically if they are already included in the business income calculation. Confirm whether the policy pays net income plus continuing expenses or only net income, and do not double count.
2. Is the $9,000 food-truck rental covered as extra expense?
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Extra expense pays reasonable costs to avoid or minimize business interruption, not to expand operations. The $9,000 rental may be covered if it was necessary to keep existing catering contracts and the expense reduced the loss. The $50,000 extra expense limit is adequate, and the 72-hour waiting period usually does not apply to extra expense, though the civil authority trigger does. The carrier may dispute the expense if the contracts would have been performed anyway, if the truck generated new business, or if the cost was a capital improvement. The owner should provide the catering contracts, the rental invoice, and evidence that the truck preserved revenue. The utility services endorsement does not apply because the restaurant's own utilities were not damaged.
3. The carrier argues there was no civil authority action because customers could reach the restaurant through an alley. How should the claim be framed?
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The claim should be framed around the actual civil authority order, not the owner's convenience. Obtain the fire department or police closure notice, photographs of barricades, and any traffic plan. If the order prohibited access to the street and the restaurant had no reasonable customer access, civil authority coverage is stronger. If the alley allowed access, the carrier may argue there was no prohibition, only impaired ingress or egress. In that case, compare the civil authority wording with any ingress/egress endorsement; ingress/egress coverage often has a shorter limit and different trigger. The utility services endorsement is not the right fit because the loss did not result from damage to the restaurant's utility service. Present daily sales records and fixed-cost schedules to support the income loss.