For days, Hawaii’s Kīlauea Volcano has been erupting, sending lava pouring through the neighborhoods of the Puna district, about 35 miles south of Hilo – the largest city on Hawaii’s Big Island. Unfortunately, the worst may be yet to come. According to a recent Fox News report: “[O]fficials warn [Kīlauea] may soon blow its top with a massive steam eruption that would shoot boulders and ash miles into the sky.” And, now, “[b]ecause of the increase in ash emission and higher altitudes of ash,” the U.S. Geological Survey has “assigned an aviation color code RED to indicate … significant ash emission that is a hazard to aircraft.” There is also ongoing concern about the release of toxic gas from the volcano.
As a result, many businesses – from hotels to golf courses to airlines – may already have suffered or are at the risk of suffering property damage or other potentially catastrophic loss. Businesses near the volcano are, of course, at risk for physical damage, while even far-flung businesses could suffer losses due to some form of business interruption. First-party property insurance, however, may cover certain of these losses.
First-party property coverage
A policyholder seeking coverage for loss or damage from this or any other volcanic eruption should generally look initially at its “first-party” property insurance policies, which protect against damage to a policyholder’s own property and economic interests. Although such policies are typically known as “property” policies, they may also be called “fire,” “all-risk,” “multiperil,” or “inland marine” policies, or they may be part of a package policy, often called a “business owners” policy, that contains a number of commercial coverages.
Generally, first-party property policies provide coverage for physical damage to a policyholder’s own property arising from a covered peril. Such property policies also can provide coverage for lost profits resulting from damage to a policyholder’s property (i.e., “business interruption” coverage). Additionally, many property policies provide “contingent business interruption” coverage, which may cover lost profits resulting from physical damage to the property of a policyholder’s supplier or customer, or to a property on which a policyholder depends for its economic livelihood, even absent physical damage to a policyholder’s own property. “Extra expense,” “ingress/egress,” “order of civil authority,” “service interruption” and “supply chain” coverages may also be included in first-party property policies.