When you absolutely, positively have to have something now, as the old commercial goes, we’re finding out that supply chain issues are making it harder and harder to get the materials we need on time. A recent article on insurancebusinessmag.com highlights insurance coverage at a time of business interruptions.
The author points out: When disruptions do occur, businesses can also try to shift risk either through contractual risk transfers or placement of insurance coverage. A classic insurance option, for example, would be contingent business interruption coverage in a property policy.
Additionally, that insurance applies even if the insured does not suffer direct property loss or damage. It is triggered if a supplier or customer has physical property damage that then causes disruption along the supply chain, impacting the insured’s business. This type of coverage works well when physical events such as floods or fires cause disruption in the supply chain.”
When it comes to COVID-19, disruptions, the answer isn’t so easy.
“With COVID-19, many courts have been tasked with answering whether the presence of the virus in a business may be ‘physical’ damage to the property,” the author continues. “Some courts have said yes, or at least maybe, but many others have said no, meaning contingent business interruption coverage would not apply if the disruption is solely due to a COVID-19 outbreak and closure, for example.”
Despite court rulings, business interruption coverage amid the pandemic is still mostly uncharted territory, with uncertainty about whether a claim may be covered, as well as to the extent of compensation. In anticipation of a supply chain incident, it’s important to proactively review contracts with business partners and insurance policies to determine what rights or remedies they may have.
Taylor Oswald, a minority-owned firm and partner organization of Oswald Companies, takes a global view of risk in the areas of property & casualty, employee benefits and health management, personal insurance management, retirement plan services and life insurance. To learn more, visit www.tayloroswald.com.
Property & Casualty Risk Advisor
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