When an Insured is Denied Access to Their Business: Is it Covered?
Ingress & Egress: Top cases on interpreting coverage.
April 22, 2019
Imagine your city is hit with a major wildfire, and the only road with access to your business is closed off due to the fire. Your employees cannot reach the store. Your customers cannot come and buy products. While your immediate concern may be fire and smoke damage, you might next wonder—will my insurance cover the loss of business resulting from lack of access?
If you have a “Loss of Ingress or Egress” provision, you may be covered. Courts generally consider the terms “ingress” and “egress” unambiguous and defined as “access.” If a covered peril causes a lack of access, then there is likely coverage for the loss of business during the period when there is no access to the business. Often the provision also provides that the physical loss or damage must trigger the loss of access, but this is not always the case.
It is instructive to analyze cases where the absence or presence of “physical loss or damage” has made a difference in coverage. In Fountain Powerboat Indus. v. Reliance Ins. Co., 119 F. Supp. 2d 552, 554 (E.D.N.C. 2000), a hurricane struck eastern North Carolina, causing devastating flooding on the only road to the insured’s headquarters. The headquarters, however, were not damaged by the hurricane or flooding, so there was no physical loss or damage to the insured’s property. The policy contained a provision:
This policy covers loss sustained during the period of time when, as a direct result of a peril not excluded, ingress to or egress from real and personal property not excluded hereunder, is thereby prevented.
Id. at 556. Despite no physical loss or damage to the headquarters, the court still found coverage because the policy language did not reference physical loss or damage within the provision. Id. at 557. Even though business interruption and ingress/egress generally require physical loss or damage to covered property, the court focused on the policy language and the lack of inclusion of physical loss or damage.
Fountain stands in stark contrast to an earlier case, Harry’s Cadillac-Pontiac-GMC Truck Co. v. Motors Ins. Corp., 126 N.C. App. 698, 700 (1997), where the policy did not include a denial of access provision but had business suspension language that included “physical loss or damage” as a necessary trigger. Despite a snowstorm causing minor damage to the roof of a car dealership and snow blocking access on the road leading to the dealership, the court did not find coverage, due in part to the lack of an ingress/egress provision, and the physical damage to the roof not proximately causing the business interruption loss. Id. at 702.
Consider City of Chicago. v. Factory Mut. Ins. Co., No. 02 C 7023, 2004 U.S. Dist. LEXIS 4266 (N.D. Ill. Mar. 11, 2004). There, the insured had a policy in place for several Chicago airports. After the September 11, 2001, attack, the Federal Aviation Administration banned flights from September 11 to 14. The policy’s ingress/egress provision included the phrasing, “such interruption must be a result of physical damage of the type insured against.” Id. at 6. The court found that because the lack of access was not due to direct physical damage to property within 1,000 feet of the airport, there was no coverage. Id. at 9.
The period or extent of coverage in these cases can also vary significantly based on the policy language. In some cases, the period of liability for ingress/egress extends to include the time needed to restore a business to the condition prior to lack of access. In Fountain, for example, the policy allowed for a period of recovery even after access was restored, until the business returned to its projected condition had no loss occurred. Fountain, 119 F. Supp. 2d at 558. The policy omitted an explicit maximum time period as to the period of recovery. Though the insurer contested the period of recovery, the court found that the insurer failed to consider the length of time for which a loss might be claimed. Id.
In Aztar Corp. v. U.S. Fire Ins. Co., 224 P.3d 960, 975 (Ct. App. 2010), the court ruled differently and found there was no basis for extension of the period of recovery. The insurer’s policy included a specific 30-day maximum recovery period. While the insured tried to argue that the period extended to 365 days in conjunction with a related provision, the court disagreed and found such a reading would render the other policy provision meaningless. Id. at 975-76.
Ultimately, coverage for ingress/egress can turn on the policy language and should be carefully reviewed prior to determining coverage. Terms such as “the period of recovery” and “physical loss or damage” can make the difference between denying or accepting coverage.
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