For many business owners, commercial property insurance offers peace of mind. It protects your building, your inventory, and often your business income in the event of a covered loss. But there’s one costly exposure that’s often excluded from standard commercial insurance policies—power failure caused by off-premises events.
Most business owners are surprised to learn that a power outage originating away from their property will not typically trigger coverage, even if it results in serious financial losses. Unless you’ve added a specific endorsement, your insurance company could legally deny your claim.
This is why the Off-Premises Power Failure Endorsement, also called a Utility Services Interruption Endorsement, is one of the most important (yet underutilized) policy add-ons in the commercial insurance market today.
Let’s explore what this endorsement covers, why it’s essential for certain businesses, and how a brief power failure could lead to significant—and uninsured—losses if you’re not prepared.
Understanding the Risk: What Happens When the Power Goes Out?
Every business relies on electricity to some extent. In some industries, power is your lifeline. When that lifeline is severed, even briefly, the consequences can be immediate and severe.
A power outage can lead to:
- Lost revenue from being unable to operate
- Spoiled or damaged inventory and raw materials
- Damage to electrical equipment or machinery
- Compromised climate control and product storage
- Cancellation of scheduled services or reservations
- Customer dissatisfaction and long-term brand damage
- Expensive emergency responses, like renting generators or relocating staff
Now imagine the cause of that outage has nothing to do with your building. A utility pole miles away was struck by lightning. A regional substation overheated. A drunk driver crashed into a transformer three blocks from your store. These scenarios all happen off your premises—which means your standard insurance policy will likely exclude any resulting losses.
The Insurance Gap You Didn’t Know You Had
Most commercial property policies contain a utility services exclusion, which specifically excludes coverage for losses caused by failure of electrical (or water, gas, communication) services when the failure originates off your property.
This exclusion applies whether the outage lasts 10 minutes or 10 days.
So even if your building is completely unharmed—no fire, no flooding, no vandalism—if the power failure causes your food to spoil, your operations to shut down, or your systems to crash, you’re on your own financially—unless you have purchased an Off-Premises Power Failure Endorsement.
What Is an Off-Premises Power Failure Endorsement?
This endorsement is an optional but powerful addition to your commercial insurance policy. It extends your coverage to include losses resulting from power, water, or communication outages that begin outside your property lines.
Need help understanding it contact us at aaapublicadjusters.com
Depending on how your policy is written, this endorsement can apply to:
- Direct physical damage (e.g., spoiled food or overheated inventory)
- Business interruption (loss of income from the inability to operate)
- Extra expenses (e.g., generator rental, rush equipment repair, relocation)
Most endorsements have customizable coverage limits, waiting periods (e.g., 24 hours), and may apply to specific utilities—so it’s important to tailor the endorsement to your specific operational risks.
Real-World Example
Case Study: A Regional Bakery & Café Chain
During a major summer storm, a regional power grid fails, leaving parts of the city without electricity for 36 hours. One of the bakery’s busiest locations—situated in a high-traffic commercial area—loses refrigeration and HVAC capabilities.
Results:
- Over $18,000 in food spoilage
- $30,000 in lost business income
- $7,000 spent on emergency refrigeration and backup power
- Dozens of canceled catering orders and long-term customer disruption
Insurance Response:
Because the bakery had added an Off-Premises Power Failure Endorsement to its commercial policy, the insurer covered the full extent of the spoilage, extra expenses, and business income loss—totaling over $50,000 in covered damages.
Without that endorsement, the claim would have been denied.
Who Needs This Coverage?
While every business could benefit from the added protection, it is especially vital for:
- Restaurants, cafés, and grocery stores
- Pharmaceutical distributors and medical supply chains
- Hotels, motels, and hospitality businesses
- Florists, nurseries, and temperature-sensitive retailers
- Manufacturing operations reliant on automated systems
- Data centers, IT firms, and businesses with server rooms
- Healthcare providers and laboratories
If your business cannot function without power—or if losing power even for a few hours would result in loss of inventory, income, or reputation—you need to consider this endorsement.
What the Endorsement Typically Covers
Coverage details vary by insurer, but a well-structured endorsement can apply to:
- Loss of Business Income: Revenue lost during the interruption caused by the outage
- Spoiled Inventory or Raw Materials: Perishables damaged due to loss of refrigeration or temperature control
- Physical Damage to Equipment: Including electronics damaged by power surges or outages
- Extra Expenses: Temporary relocation, generators, emergency repairs, overtime labor
- Communication or Water Supply Failures: If included in the endorsement, losses caused by interrupted internet, phone, or water services can also be covered
Make sure your endorsement specifies the types of utilities covered, any waiting periods before coverage begins, and whether surge or restoration damage is included.
Final Thoughts: Prepare Before the Power Goes Out
Power failures caused by off-premises events are unpredictable—but they’re far from rare. Grid outages, severe weather, accidental damage to utility lines, and overloaded systems are becoming more common. Businesses that don’t plan for these risks are often caught off guard, only to find out—too late—that their insurance won’t help.
Adding an Off-Premises Power Failure Endorsement to your commercial policy is a low-cost, high-impact upgrade that can save your business thousands—or even hundreds of thousands—when disaster strikes.
Get a Professional Policy Review — At No Cost to You
Not sure if your current commercial insurance includes this coverage? Let our experienced team review your policy and help you identify potential gaps—including exclusions you may not know exist.
We offer free, no-obligation consultations for business owners across all industries.
Call us at:
Pennsylvania: 215.627.2000
New Jersey: 609.978.1200
Toll-Free Nationwide: 1.800.410.5054
Or Public Adjusters Nationwide – AAA Public Adjusters, LLC to request your free consultation online.
Your business deserves full protection—even from the risks you can’t see coming.
