BI Policy Extension - Denial of Access and Loss of Attraction

Business Interruption is a very complex area and we frequently come across incidents that are not adequately covered by the policyholder’s BI insurance. Quite often, however, they could have been.

Businesses can be severely interrupted by incidents that occur in their vicinity even where there is no damage whatsoever at the business itself. This situation is catered for in a business interruption policy by way of a policy extension. There are two such extensions – Denial of Access and Loss of Attraction.

Denial of Access

Denial of Access is designed to cover situations where it becomes physically impossible for customers or staff to get to a business location. For example a major flood may not damage a policyholder’s premises on the 11th floor of an office block, but it could render the building and surrounding areas inaccessible until the waters subside, access roads are back in action and the whole property is declared safe. A Denial of Access extension would provide cover for the business interruption loss that might occur.

So, Denial of Access is all pretty straightforward? Well no, because businesses frequently face situations where access is not actually prevented or denied or even hindered. For example, a shop owner operating in a shopping centre could suffer a significant drop in trade following a serious flood to the basement car park levels beneath the shopping centre. The situation could also be compounded by virtually no on street parking being available close to the shopping centre. As a result footfall to the shopping centre might drop by more than 50 per cent.

A Denial of Access extension would not have helped the policyholder in these circumstances because access was not denied.

Loss of Attraction

However, a Loss of Attraction extension would have enabled the shop owner to make a successful claim because this extension provides protection where potential customers visiting the premises are denied access because of lack of desirability or convenience.

Loss of Attraction cover also protects business for reasons less obvious than issues such as floods. For example, many shopping centres have “anchor” tenants. These types of tenants are considered a major draw and the main reason for customers visiting the centre. If the “anchor” store suffers a loss that forces it to shut, the resulting loss in footfall can harm all the other shops in the centre. In these sorts of circumstances a Loss of Attraction extension can be used to make a claim.

Our advice

Denial of Access and Loss of Attraction extensions to a business interruption policy can really make sense and we recommend that they are always included in discussions with clients when arranging their BI protection.