Your engineering controls, lab instruments, refrigerators and air handlers are just a few of the systems that could go down in a power outage. They could also seriously harm your contents or personnel.

You need an emergency response plan and excellent insurance coverage. Your insurance should cover your property and your liability for the financial losses of others. You might also need environmental liability or pollution insurance that covers power outages as a peril.

The complexity of commercial property exclusions

Many commercial property policies exclude several types of power loss. The most common exclusions are power surges, low power and loss of power. Damage to systems from a power loss typically isn’t covered under business owners policies or commercial property policies. You’d need a utility interruption clause in your policy for that.

A utility interruption clause is triggered if a covered peril, like a fire or vandalism, disables the utility you rely on and your physical property is damaged as a result. The clause must state the type of utility, the causes of loss and the property on your premises you wish to insure. (For electronic data, you’d need a cyber risk policy.)

Your utility interruption extension can also be written to provide income protection. This helps if your business operations are substantially interrupted because of a power loss.

Your commercial property insurance will typically cover property loss secondary to the power outage if the damage is due to a covered type of loss. For example, say a power outage damages your refrigerator, which causes the chemicals inside it to warm, which starts a fire that burns your lab. In this case, the burned property would probably be covered because fires are one of your insured perils.

The same applies to contamination and stock spoilage due to damaged systems, as long as contamination and spoilage are covered perils in your policy.

Coverage for secondary losses is crucial since that is where the greatest income loss is likely to originate.

A business interruption, or business income, policy could be written to cover restoration of operations, losses from delayed product release, and forfeited milestone payments, among other losses. These kinds of coverages are often included in policies written for labs or broader industries that include laboratory work. We can help you find the right coverage for your operations.

Liability insurance

Some specialty insurance policies that tailor coverage for labs or industries with labs have liability insurance to protect your company if a partner or client claims you harmed them. This liability coverage might be included in your policy or available as an add-on.

Almost all labs need to consider environmental or pollution liability insurance. Having this coverage will help you if a power outage causes a secondary environmental incident. Ask us about environmental cleanup costs.

Also ask about insuring the property of others from losses related to power outages. These could be the research and development projects of commercial partners, such as culture collections. Or they could be clients’ personal property, such as specimens stored in fertility clinics.

If you’re in the biotech industry, coverage for staff is another consideration. Bodily injuries, like burns, and health hazards, like accidental chemical exposures, are major risks in a power outage. Coverage for staff is especially important if you have nonemployee or temporary staff. If you are in a university setting, make sure you have coverage for your student researchers, too.

Final concerns

Once you’ve tailored your insurance policy to protect against losses from power outages, make sure you understand how your coverage limits work. Will all the financial losses be covered under one blanket insurance limit, or will you have separate limits for different losses? If you have excess liability insurance, will it respond after a power outage? And what protections do you have if your stock is ruined and you have to start over?

Most insurers expect you to have an emergency response plan for power losses. Remember to communicate yours to your team and practice it regularly.