Civil Authority Clause: What it is, How it Works,

Example
What Is a Civil Authority Clause?
A civil authority clause, also known as a public authority clause, is an insurance policy provision that outlines
how the loss of business income coverage (BIC) applies when a government entity denies access to the insured
property.

KEY TAKEAWAYS
 A civil authority clause is an insurance policy provision that outlines whether or not lost income will
be reimbursed when a government entity denies access to covered property.
 Civil authorities may prohibit access to certain areas after a natural disaster or another life-threatening
event occurs, forcing local businesses to close and therefore lose income.
 Property insurance often covers lost income while a business is closed due to property damage, but
doesn't always contain provisions that protect a business that is unable to reopen after an evacuation.

Understanding a Civil Authority Clause

Civil authorities (local, state, or federal governments) may evacuate or prohibit access to certain areas after a
natural disaster occurs. For example, they may deem that an area poses a legitimate public safety threat in the
aftermath of a hurricane, wildfires, flooding, rioting, an act of terrorism or another life-threatening event.

Should civil authorities decide to take such action, the financial implications for companies operating in the
area to be evacuated and closed off can be huge. In effect, business owners will be forced to shut down their
operations, resulting in a loss of potential income for an extended period of time.

Property insurance policies often include provisions that provide loss of income coverage while a business is
closed as a result of property damage. They may not, however, contain provisions that cover the loss of
income because the business owner is unable to reopen after an evacuation. Whether or not this type of loss is
covered depends on the policy’s civil authority clause.

How a Civil Authority Clause Works

Civil authority clauses are standard in property insurance policies for both businesses and homeowners,
outlining the situations in which business interruption insurance —insurance coverage that replaces business
income lost in a disaster—is extended. The clause indicates whether the insurer will pay for business income
losses in the case that a civil authority prevents the policyholder from accessing the premises covered by the
policy.

Time limits for coverage can vary, usually from one week to 30 days, and there is often a 72-hour waiting
period before a claim can be triggered.

A civil authority clause can also protect an insured from damages caused by firefighters and police officers
when dealing with a situation on a property.

One important caveat is that the clause requires that the loss of income be caused, at least proximally, by the
civil authority’s order. The loss of income cannot be caused by only the natural disaster or similar life-
threatening event—there must also be an order to evacuate the property. A company may choose to purchase
additional business interruption insurance policies to increase its level of protection.

A Louisiana court ruled that “actions of civil authority” in the aftermath of Hurricane Katrina that do not
explicitly prohibit access to an insured party's premises won't trigger civil authority coverage.
Example of a Civil Authority Clause
Many days of heavy rain have caused the river in a small town to reach historically high levels. Expecting that
there is likely to be a flood, the town government orders its citizens to evacuate. In the end, this prediction
turns out to be correct, prompting authorities to issue another order, this time to prevent residents from
returning home while they determine the extent of the damage.

Because residents are not allowed back for several weeks, local businesses are forced to remain closed. Even
though the flood did not damage his property directly, the owner of an auto body shop located in town can
receive part of his lost income because his property insurance policy contains a civil authority clause.

Debris Removal Insurance: Meaning, History,

Examples
What Is Debris Removal Insurance?
Debris removal insurance is a section of a property insurance policy that provides reimbursement for clean-up
costs associated with damage to property.

Policies with a debris removal provision typically only cover debris resulting from an insured peril, such as
charred wood or twisted metal from a building fire.

How Debris Removal Insurance Works

Debris removal insurance policies commonly have a cap on the amount of reimbursement that a policyholder
can receive for debris removal costs. While policies typically have debris removal as a standard provision, the
policyholder is often able to purchase additional coverage. The policy provision may also extend to the
removal of hazardous materials that may cover the property but could exclude pollutants.

When calculating the many costs involved with repairing and replacing property after destruction or
damage, the costs of removing the debris and cleanup are in addition to—rather than a part of—the value of
the damaged property. As such, the impact on the total amount of the loss, and the coverage limitations on
these costs in most standard property insurance policies, are frequently overlooked in arranging the coverage
initially.

KEY TAKEAWAYS
 Debris removal insurance coverage is not typically part of a property owner's basic property insurance.
 Debris removal claims must be entered within 180 days and should include an estimate from a licensed
contractor.
 Coverage is usually limited to 25% of the insurer's liability for the direct property loss by a covered
cause of loss.

Debris removal insurance coverage is usually offered as “additional coverage” rather than a part of basic
property coverage. Coverage is usually limited to 25% of the insurer’s liability for the direct property loss by a
covered cause of loss, plus applicable deductible (unless stated as otherwise in policy declarations).

A claim for debris removal is payable only if reported to an insurer within 180 days after the date of loss. Note
that expenses must be reported, but not necessarily incurred, within that time. A contractor’s estimate should
satisfy this requirement and it is important to get the full amount in writing to present to the insurer.

History of Debris Removal Insurance

Under the 1943 New York Standard Fire Policy and its predecessors, debris removal costs aren't mentioned as
either covered or excluded. This gave rise to controversy, with some insurers routinely including these costs as
a part of the claim settlement and others rejecting or resisting payment, contending that this cost was not
a direct result of the loss, and, as such, not covered.

The policy provision may include the removal of hazardous materials, but not pollutants.
To clarify coverages, a debris removal clause was added to the forms attached to the standard fire policy. It
simply stated that the coverage extended to include the cost of removal of the debris resulting from the
property loss.

The debris removal coverage was within and did not increase, the limit of liability. Debris removal costs were
not considered in determining compliance with the coinsurance clause of the policy; however, if a coinsurance
penalty was found to apply, reducing the recovery of the property loss, customary adjustment practice was to
apply the same limitation to the payment for debris removal.