A recently published FC&S Bulletin answered a nuanced coverage question for a situation that is all too common in landlord tenant relationships. In the scenario, the tenant purchased a Business Owner Policy form (BP 00 03). The landlord was required to remove underground tanks from his property and the removal process suspended the tenants’ business operations.
Does the tenant under his own policy for business income losses during the tank removal process? No.
Business Income Coverage for Insured Tenant
June 4, 2012
Q. I have an insured that is a retail auto tire dealer with coverage written on a BP 00 03.
The insured leases the premises. There are underground fuel tanks on the premises; the insured does not own the tanks. The property owner owns the tanks and is now required by the state to remove the tanks. The property owner told our insured the business will need to be shut down for two to four days while the tanks are being removed. Is there coverage for our insured, the tenant, for loss of income due to being shut down?
A. In order to trigger business income coverage, there must be direct, physical loss or damage to the property caused by a covered cause of loss, such as windstorm or hail. In the situation you describe, removal of fuel tanks is not a covered cause of loss causing the business suspension, so the coverage is not triggered.
While it is true that the tenant may not recover on a first party claim through his own business income insurer, the tenant may have a third party claim against his landlord’s liability or operational policies and not be entirely foreclosed of recovery.