Business interruption losses caused by supply chain disruptions are rising as manufacturers increasingly rely on factories around the globe to supply necessary components for their products. Two significant examples of supply chain disruptions in 2011 that caused widespread losses for manufacturers were the earthquake/tsunami in Japan and the massive flooding in Thailand. Factories that manufacture critical components for the automobile and technology industries were unable to provide their customers with necessary components. With supply disrupted, manufacturers were forced to stop or limit their operations.
Contingent Business Interruption (CBI) insurance coverage may be available to pay for a company’s losses due to such supply chain disruptions. However, CBI coverage is complicated and requires a thorough understanding of the policy and related issues, such as applicable deductibles, the scope of the business interruption, the calculation of loss, and potential applicability of exclusions. This article provides an overview of what you need to know in order to maximize recovery from a property insurance program after business is interrupted due to a supply chain disruption.
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