Does Business Insurance Cover Power Outages in Texas?

Short answer: Usually not on its own. Most commercial property and business income policies exclude losses caused by a power failure that starts away from your premises. Coverage for an off-site outage generally comes from a separate utility services endorsement, and even then it typically pays only when the outage was caused by physical damage to utility property from a covered cause of loss, such as ice bringing down a line. Grid-ordered rolling blackouts with no physical damage are often not covered. Every policy is different, so the wording on yours controls.

Texas business owners learned this the hard way in February 2021. During Winter Storm Uri, more than 4.5 million people in Texas lost power, some for as long as four days, according to FERC. Plenty of the businesses that went dark had property insurance. Far fewer had a policy that paid for the days they could not open. With winter coming, this is the week to find out which group you are in.

Why a standard commercial property policy says no

The common ISO causes of loss forms contain a utility services exclusion. As quoted by FC&S, it removes coverage for "the failure of power, communication, water or other utility service supplied to the described premises" when the failure originates away from the described premises.

There is a carve-back. If the power failure or surge results in a covered cause of loss at your location, such as a fire, the policy pays for the damage caused by that fire. What it does not pay for is the outage itself: the lost sales, the payroll you kept running, or the inventory that warmed up while the lights were out.

Business income coverage follows the same logic. It is built to pay lost income after direct physical loss or damage to your property. A dark building with nothing broken inside does not meet that trigger. On top of that, standard business income coverage starts after a 72-hour waiting period, which Merlin Law Group describes as a "time deductible." Plenty of outages are over before 72 hours pass.

The endorsements that actually cover off-site outages

Two ISO endorsements fill most of this gap. Your carrier may use its own versions with different names, so read the form, not the title.

Utility Services: Time Element (CP 15 45)

This is the one most businesses care about. It extends business income and extra expense to an interruption of utility service to your premises. According to FC&S, the interruption must result from "direct physical loss or damage by a covered cause" to the utility property you select on the schedule, such as power supply property or communication supply property.

Three details decide whether it works when you need it:

• Overhead transmission lines. Power supply property can be scheduled with or without overhead lines. If overhead lines are not included, damage to them is not covered. Since most widespread outages start with storm damage to overhead lines, this box matters more than any other on the form.
• The waiting period. FC&S notes the revised form lets you choose a utility services waiting period ranging from none up to 168 hours, separate from the standard 72 hours. A 24-hour option is common.
• The limit. Utility services coverage is frequently written with a sublimit that is far smaller than your main business income limit. A Haynes and Boone attorney told Law360 that "lack of utilities is usually a sublimit in policies."

Utility Services: Direct Damage (CP 04 17)

This endorsement covers physical damage to your own property caused by an off-site utility interruption, such as equipment damaged when service is lost. It carries the same physical damage trigger and the same overhead line choice. Any limit shown is part of, not in addition to, the limit on the covered property.

Uri vs. Fern: why the cause of the outage decides the claim

The two most recent Texas winter storms show how the same dark storefront can be covered in one case and not in another.

Winter Storm Uri (2021) was mostly a grid supply problem. ERCOT ordered 20,000 megawatts of rolling blackouts, which FERC called "the largest manually controlled load shedding event in U.S. history." For utility services coverage, that is a problem. SDV Law explains that coverage likely will not apply if the outage was a deliberate act by ERCOT to shut off power, though there may be coverage if the outage traced back to physical damage to a power generator. Insurers also argued that repeated rolling outages were separate occurrences, each with its own waiting period. We are not aware of a definitive Texas appellate ruling on first-party coverage for Uri load shedding, so expect these fights to continue case by case.

Winter Storm Fern (January 2026) looked different. ERCOT's post-event report says it issued no Energy Emergency Alert and there were "no systemwide power outages." The outages that did happen came from ice on power lines and falling trees and "were not related to issues on the ERCOT grid." That is physical damage to utility property, which is exactly what CP 15 45 is written for, as long as overhead lines were scheduled and the outage outlasted the waiting period.

Next winter could look like either storm. The only way to be ready for both is to know what your form says before it happens.

Spoilage is a separate coverage

If you run a restaurant, grocery, florist, pharmacy or anything else with refrigerated stock, utility services coverage may not pay for what spoils. An FC&S coverage Q&A notes that the utility services endorsement does not include spoilage, because spoilage is a consequential loss from the power failure.

That is the job of the spoilage endorsement (ISO CP 04 40). Per this form summary, it can cover a temperature change caused by an interruption of power on or off premises, plus mechanical breakdown of refrigeration equipment. It has its own limit and deductible. Watch the exclusions: the form summary lists utility inability to supply power because of lack of fuel or governmental order. In a Uri-style event, that wording could matter a lot. If a refrigeration maintenance agreement is listed, you have to keep it in force.

A pre-winter checklist for Texas business owners

Pull your commercial property policy, or ask us to, and look for these answers:

1. Do you have utility services time element coverage at all? If not, an off-site outage is likely an uninsured loss of income.
2. Are overhead transmission lines included? Look for the checkbox or wording on the schedule.
3. Which utilities are scheduled? Power supply, water supply and communication supply property are typically listed separately. A business that cannot operate without internet may need communication supply property covered.
4. What is the waiting period? Compare it to how long a realistic outage would last for you.
5. What is the sublimit? Estimate what a five-day closure would cost in lost profit and continuing expenses and compare.
6. Do you need spoilage coverage? If you hold perishable stock, check whether power outage is a covered cause on your spoilage form.
7. Do you know your notice duties? Morgan Lewis noted that after Uri many policyholders struggled to meet notice requirements because of ongoing outages and limited access to property. Save your agent's and carrier's claim numbers somewhere you can reach without power.

Insurance is only part of the plan. A backup generator sized for your critical loads, a written shutdown procedure, and a list of what to move or protect when a hard freeze is forecast can keep a short outage from turning into a claim at all. If you own a hotel, our guide to frozen pipes and hotel insurance covers the freeze side of the same storm.

Frequently asked questions

Does business interruption insurance cover a power outage?

Standard business income coverage generally requires direct physical loss or damage to your property and has a 72-hour waiting period, so a plain off-site outage usually is not covered. A utility services time element endorsement can extend coverage to off-site outages caused by physical damage to utility property, subject to its own waiting period and limit.

Are ERCOT rolling blackouts covered by insurance?

Often not. Utility services coverage typically requires physical damage to utility property by a covered cause of loss. An intentional load-shed order without physical damage may not meet that trigger. Results depend on your policy wording and the facts of the outage.

Does my policy cover food that spoils during an outage?

Only if you carry spoilage coverage, or a package policy that includes it, and power outage is a covered cause on that form. Check for exclusions tied to governmental orders or fuel shortages.

What does "including overhead transmission lines" mean?

It is an option on utility services endorsements. If it is selected, damage to overhead power or communication lines can trigger coverage. If not, a storm that drops overhead lines may not.

How long is the waiting period for utility services coverage?

It varies by policy. Revised ISO forms allow choices from no waiting period up to 168 hours, and 24 hours is a common selection. Shorter waiting periods usually cost more.

Find out before the next freeze

The worst time to read your utility services endorsement is the morning after the power goes out. Donegan has helped Texas businesses manage risk since 1911, and we can review your current property and business income coverage, show you exactly how an outage would play out under your policy, and quote the endorsements that close the gap. Request a commercial quote or call 830-303-8300 to set up a coverage review.

This article is general information, not legal advice or a statement of coverage. Coverage depends on the specific terms, conditions and exclusions of your policy.