What is Loss of Attraction?
Loss of Attraction is a business interruption coverage that pays for lost income when customers stay away from your restaurant not because your property is physically damaged, but because a nearby attraction, landmark, or business that draws customers to your area is damaged or closed. For example, if your restaurant is located near a popular theater, sports arena, convention center, or tourist attraction and that facility is damaged by fire and closed for repairs, you may experience a significant drop in customer traffic even though your own property is undamaged.
Standard business interruption coverage only pays when your own property suffers direct physical damage, but Loss of Attraction coverage (also called civil authority coverage or dependent property coverage) extends protection to these indirect losses. This coverage is typically added as an endorsement and may have sublimits and time restrictions.
What You Need to Know
How Standard Business Interruption Falls Short:
Standard business interruption insurance wouldn’t pay a penny because your property isn’t damaged. Loss of Attraction coverage fills this gap by recognizing that your business success is interconnected with nearby properties and attractions.
Coverage Requirements and Limitations:
The coverage typically has specific requirements, such as:
- A civil authority order prohibiting access to your area
- Physical damage to a specified dependent property within a certain distance of your restaurant
The coverage also has limitations, like a maximum of 30 or 60 days of coverage.
Why It Matters for Restaurant Owners
Many restaurants depend heavily on foot traffic generated by nearby attractions, and the closure of those attractions can be financially devastating even if your restaurant remains physically undamaged.
Real-World Scenarios:
Sports Stadium Dependency: If you operate a restaurant near a sports stadium and the stadium is damaged and closed for the entire season, your revenue could drop 50% or more, but standard business interruption insurance wouldn’t cover this loss.
Shopping District Closure: If your restaurant is in a shopping district and a major fire damages several neighboring buildings causing the entire area to be closed off by the fire department, you may be forced to close or experience severely reduced traffic, but standard business interruption wouldn’t cover this loss.
When This Coverage Matters Most:
If your restaurant’s success depends significantly on one or more nearby attractions or businesses, Loss of Attraction coverage is an important endorsement to consider, as it protects you from a real and potentially severe exposure that standard policies don’t address.