Last week’s post included analysis of many courts’ interpretations of business interruption coverage and the conflict created by policy provisions requiring a suspension of hotel operations and mitigation of property loss. This week’s post provides tips to help hotel owners and risk managers avoid business interruption coverage gaps.

Cases holding that business interruption coverage is triggered even when the insured suffers only a partial suspension or impairment to its business operations are hard to find and often rely on specific and alternative wording in the business interruption section in the property insurance policy. For example, the court in Aztar Corp. v. U.S. Fire Ins. Co., 224 P.3d 960, 965 (Ariz. App. 2010), determined the insured’s business interruption coverage may have been triggered, even when the hotel’s operational capacity was not diminished, because the specific words in the policy modified “interruption:”

This policy insures against loss resulting directly from necessary interruption of business, whether total or partial, caused by damage to or destruction of all real or personal property, manuscripts and watercraft, by the peril(s) insured against, during the term of this policy, on premises situate per the Territorial Limits in this policy.

Because the hotel’s business interruption coverage included the word “partial,” the casino owner was able to recover for loss of revenue due to decreased patronage. Inclusion of the word “partial” meant the business impairment did not need to impact the entire business, but only a portion.


To avoid business interruption coverage gaps consider the following:

  1. Review the hotel’s property policy to determine if the business interruption provisions contain words such as suspension, cessation, or interruption of operations.
  2. Consult with an insurance broker, agent or lawyer educated in business interruption and hospitality property coverage and determine whether the hotel’s policy would likely require a complete suspension of operations before coverage is triggered.
  3. If hotel mitigation efforts may defeat business interruption coverage, shop for business interruption coverage that contains words that modify the term “suspension.” Look for terms in the business interruption provisions such as partial suspension, impairment, harm, slowdown, decrease, or reduced income.
  4. Shop for endorsements which contain a definition of the word “suspension” that will protect the hotel even if it only suffers a slowdown due to property loss. Market segments endorsements, like ISO form MS HM 01 07 07, Hotels, Motels and Inns, defines the term “suspension” as, “the slowdown or cessation of your business activities.”

Although courts’ interpretations of these terms can be unpredictable, understanding the interpretations in Part I and Part II of this series and using these tips when shopping for business interruption insurance, can help a business avoid financial devastation after a loss. Careful review of a hotel’s property policy will help ensure that the hotel is not wasting its premium payments on business interruption coverage which will likely never be triggered. Similarly, an educated review will help hotel owners and risk managers purchase business interruption coverage that provides actual security for hotel income and makes sense for the hospitality industry.