Volcanoes, hurricanes, and polar vortexes—oh, my! From the ongoing eruption of the Kilauea volcano in Hawaii, to huge winter storms, massive mudslides, and the unfortunately reliable hurricane season, it seems like natural disasters have been near constant over the past year. In addition to the catastrophic toll these events take on people and communities, the toll on a business can be high. Understanding the full range and implications of your company’s risks, and putting the right coverage in place to protect against those risks, is vital. When a natural disaster strikes, having appropriate levels of property damage, business interruption and contingent business interruption insurance can be three keys to stability.
An unexpected or catastrophic loss can force any company out of business, even if it is insured. You must understand your company’s risks and how your insurance policies cover those risks in order to manage them and maintain stability.
Having the correct insurance in place is only the first step. Property and business interruption insurance policies are often complex, and your suppliers, customers and other business partners’ insurance situation may have a direct impact on you as well. Even if your business doesn’t suffer any direct physical damage to its facilities following a natural disaster or other loss, your customers or suppliers may have, and that could result in what is known as a “supply chain” or “contingent business interruption” loss of revenue and sales. If you are unprepared when a disaster strikes, you may miss out on substantial amounts of insurance coverage to which you may be entitled. The time to prepare is before a disaster occurs. Take the time now to understand your insurance coverage and other risk transfer methods and opportunities. Know your rights. And put a plan in place to protect yourself, your employees, and your property before the loss occurs. Then, if disaster strikes, you’ll be in a better position to make it through and to access your insurance coverage to help restore operations.
Business Interruption insurance provides the policyholder with important peace of mind—it covers lost business arising from unexpected damage to the policyholder’s property. But what if the damage isn’t to the policyholder’s own property—what if the losses arise because of damage a supplier or customer suffers? When a link in your supply chain breaks, Contingent Business Interruption or “CBI” coverage can step in to replace it.
CBI coverage, like Business Interruption coverage, is a property insurance extension that addresses lost income suffered due to an interruption of business. Instead of focusing on loss or damage suffered by the insured on its own property, however, CBI coverage addresses “contingent” losses, or losses that involve suppliers or customers. A CBI loss is a loss that results from damage to a supplier or customer that prevents the supplier from providing its goods or services to a policyholder or prevents a customer from receiving the policyholder’s goods or services. This coverage is crucial for policyholders whose business depends upon supply chains, customers or other “streams of commerce” for commercial success. Over the past few years, we’ve seen a spike in the number of CBI claims made by policyholders. During the same timeframe, however, we’ve also seen an increase in the number of coverage disputes related to CBI coverage. Although the concept is fairly straightforward, recovering for CBI losses often isn’t.
Spring brings warmer weather and a welcome return to green after winter gray. But spring can sometimes go too far, with rain that escalates into destructive floods. As floodwaters recede and cleanup begins, obtaining insurance proceeds and FEMA assistance are critical and immediate steps to recovery. The following practices can help maximize your recovery. Continue reading →