Georgia Property & Casualty Practice Exam

What happens if a policyholder tries to claim for a loss resulting from a utility service interruption that originates off their premises?

1. The claim will be fully compensated.

2. Only partial reimbursement will apply.

3. The claim will be denied outright.

4. A settlement will be made minus a standard deductible.

The correct answer is: The claim will be denied outright.

In the context of property insurance, most standard homeowners and commercial policies include specific provisions regarding utility service interruptions. Typically, these policies cover losses due to direct physical damage caused by specific perils but do not cover losses resulting from interruptions in utility services, such as electricity, water, or gas, that originate outside the insured premises. When a utility service interruption occurs due to issues off the insured's property, it generally falls outside the coverage of most property policies. This is because the interruption is not the direct result of a peril listed in the policy. As a result, claims made under these circumstances are usually denied outright. In summary, unless there are specific endorsements in the policy that extend coverage for utility service interruption losses, the policyholder would not be compensated for these losses, leading to the outcome that the claim would be denied. Understanding this aspect of coverage is crucial for policyholders as it highlights the limitations of their insurance policies related to off-premises interruptions.