When a Business Entrance is Blocked: Ingress/Egress Coverage in the Wake of Hurricane Harvey and Irma

by Zelle LLP

As businesses and insurers recover from the devastation of Hurricane Harvey and Hurricane Irma, it may take time to fully assess the effects of these storms on a business’s bottom line. Invariably, however, the scale of these natural disasters likely provides some immediate impact on insureds’ businesses – the ability to access the premises may be barred or impacted.

And, so enters ingress/egress business interruption coverage. Ingress/egress coverage involves the inability to enter or leave the insured premises. Some examples include customers not being able to access a store, product is unable to be shipped out, or raw materials are unable to be shipped in.

Ingress/egress coverage is similar to civil authority insurance in that both apply when access to the insured’s property is limited. The difference between these coverage is that ingress/egress coverage is not limited to circumstances where the government prevents access to the premises by way of law, ordinance, or emergency order. Said differently, a civil authority’s interference is not required for ingress/egress coverage to be triggered.

Commercial property policies may provide coverage for damages arising from prevention of ingress to or egress from an insured’s premises. However, not all insurance companies offer this kind of coverage, so an analysis of the individual carrier’s policy language and endorsements is critical. Additionally, and as a result, ingress/egress policy language tends to be less standardized than other forms of business interruption coverage. As an example, an ingress/egress provision may read:

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.

An often-cited case addressing an ingress/egress provision like the one above is Fountain Powerboat Indus., Inc. v. Reliance Ins. Co., 119 F.Supp.2d 552 (E.D.N.C.2000). In Fountain, the district court was faced with determining whether recovery under this ingress/egress provision required property damage to trigger coverage. The plaintiff conceded that business interruption coverage generally requires that the interruption be caused by damage to covered property, but relied upon the ingress/egress clause in its policy to extend such coverage when a covered cause of loss barred access to the property. The court held:

1.      The closure of the only access road to insured’s facility triggered coverage under the egress/ingress clause even though the interruption was not caused by physical damage to the insured premises; and

2.      The coverage period required to “restore the insured’s business” to its previous condition was triggered even though interruption was not caused by physical damage to facility.

The Fountain case, while not controlling in either Texas or Florida, provides some guidance for parties and courts in those jurisdictions when analyzing ingress/egress claims. It is likely that courts in Texas and Florida will agree with the Fountain court’s conclusion that the ingress/egress provision does not typically require actual damage to the insured property to trigger coverage. This is because the general business interruption provisions would cover those very same damages if property damage at the insured property were required to trigger ingress/egress coverage. That would render the ingress/egress clause meaningless. The judge therefore concluded, “that the parties intended that the policy would provide coverage not only when the property itself was inaccessible, but also when the only route to the Facility caused the property to be inaccessible.”

Moreover, the Fountain court determined that the plaintiff could recover not only for the period of time that the damage actually blocked access to the insured, but also for “the length of time to restore Fountain’s business to the condition that would have existed had no loss of ingress/egress occurred.” A more recent Arizona case, Aztar Corp. v. U.S. Fire Ins. Co., 223 Ariz. 463, 479 (Ct. App. 2010), challenged this conclusion, however. In Aztar, the court declined to extend the period of liability to the length of time necessary to restore the business because that policy contained an explicit maximum indemnity period for impaired access (30 days).

The court in Fountain further determined that the ingress/egress provision was only triggered if the lack of access was due to the “direct result of a peril not excluded” by the policy. This position was reinforced by City of Chicago v. Factory Mut. Ins. Co., No. 02 C 7023, 2004 WL 549447, at *3 (N.D. Ill. Mar. 18, 2004), where, after considering Fountain, the court determined that because the ingress/egress business interruption claim was due to damage specifically excluded by the policy, no coverage was afforded.

Notably, the Fountain court determined that ingress/egress coverage could be triggered even if there is not a complete prohibition of access to the property. This conclusion differs from cases discussing civil authority provisions, which can require complete prohibition of access. In Fountain, the property was still somewhat accessible and workers were able to be transported to the facility by Fountain using large trucks, but production at the Fountain facility fell significantly during the period of business interruption. The court still found this was sufficient to trigger coverage.

Case law in Florida and Texas is not well developed with respect to ingress/egress claims. Nevertheless, courts in these jurisdictions have sought guidance to analyze ingress/egress provisions by reviewing the more well-developed case law on civil authority provisions. See e.g., Houston Cas. Co. v. Lexington Ins. Co., No. CIV.A. H-05-1804, 2006 WL 7348102, at *1 (S.D. Tex. June 15, 2006) (analyzing case law on civil authority and ingress/egress in interpreting a business interruption provision following mandatory evacuations for a hurricane that never made landfall or damaged the property).

In Texas and Florida, as in most jurisdictions, the relevant issues with respect to potential coverage under a civil authority provision are:

1.      Whether a covered cause of loss damaged property;

2.      Whether the action of civil authority actually prohibited access to the described premises; and

3.      Whether the time element deductible (“waiting period”) is met.

Taking the analysis in cases addressing civil authority claims, and extrapolating the analysis from cases such as Fountain, Aztar, and City of Chicago, a carrier should consider affording coverage under an ingress/egress provision when:

1.      The listed sublimits or waiting period has been met and the duration of liability has not run (which usually falls between 30 and 90 days);

2.      The event directly preventing access is covered under the policy and is not caused by an excluded cause of loss; and,

3.      Ingress to or egress from an insured premises is reasonably prohibited.

Ultimately, ingress/egress claims are more immediately felt by insureds and their businesses. Whether there will be a dispute with respect to coverage for these claims will likely be due to whether the access was prohibited due to a covered or excluded cause of loss, the reasonableness of the prohibition of access, and the length of time the business interruption loss is reasonably sustained. A policy’s language should be closely considered and no ingress/egress claim is likely to be the same.  


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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