West Virginia Property and Casualty Licensing Practice Exam

If a covered business is shut down due to acts of civil authority, which BOP coverage applies without a waiting period?

1. Business Interruption

2. Extra Expense

3. Property Damage

4. General Liability

The correct answer is: Extra Expense

In the context of a Businessowners Policy (BOP), the coverage that applies when a business is shut down due to acts of civil authority is Extra Expense coverage. This particular coverage is designed to reimburse the insured for additional expenses incurred to maintain operations when a civil authority prevents access to the business premises. Unlike Business Interruption coverage, which typically involves a waiting period before benefits kick in to cover lost income due to business interruption, Extra Expense coverage is tailored to cover those urgent expenses that the business must incur as a direct result of the civil authority's actions, without any waiting period. This allows businesses to quickly adapt and mitigate losses, emphasizing the importance of maintaining operational continuity despite the disruption caused by external factors. In contrast, Business Interruption focuses more on lost revenue during the interruption, and Property Damage pertains to physical damage to the business's assets. General Liability relates to claims made against the business for bodily injury or property damage to third parties, which does not apply in this situation where government action is the cause of the business shutdown. Thus, Extra Expense is the only coverage that addresses the unique needs of businesses affected by civil authority actions promptly and effectively.