December 8, 2021

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Business Interruption Exclusion Clauses

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It is known that the passage of Hurricane Maria through Puerto Rico in 2017, not only caused structural damage but also other damages that interrupted many public and private services for months. Many businesses had to shut down or limit their services and many had to file a claim based on business interruption coverage.

This was the case in Ortiz Optometric Care LLC v. Universal Insurance Company.1 In Ortiz, the insured was closed for 19 days following Hurricane Maria and filed a claim for Business Interruption with their insurer. The insurance company denied business interruption by applying an exclusion clause under the policy. Universal alleged that the business interruption was not caused directly by Hurricane Maria and the loss was not covered under the exclusions included in the policy. Therefore, Universal filed a Motion for Summary Judgment to Dismiss alleging that 32 facts in the complaint against them were not in controversy. In response, the insured stated that the cause of the business interruption was in controversy and that Summary Judgment should not be granted until evidence had been presented. Plaintiff must demonstrate that the winds and rain of Hurricane Maria caused the loss and not the cleaning of the debris located in the parking lot of the condominium where the office is located. The Plaintiff also alleged that due to the building’s roof damage, water leaked into the office and caused a closing for several days.

The policy included an exclusion clause regarding the loss or damage caused by surge of power (utility services), therefore, the failure of power service caused by Hurricane Maria was not considered a direct cause under the policy to grant business interruption coverage. The Optometric office was closed for 19 days from September 20, 2017, to October 16, 2017, due to the direct damages caused by Hurricane Maria but it was not in controversy that by October 13, 2017, the building was open to the public and was providing water and power services.

The Court of Appeals confirmed the trial court’s ruling denying the insurer’s Motion to Dismiss and held that the only controversy in this case was whether the office was closed during the period of 19 days due to the direct damage caused by Hurricane Maria.
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1 Ortiz Optometric Care LLC v. Universal Ins. Co., 2021 WL 4205866 (2021).

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