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Does business interruption insurance cover losses due to supply chain issues?

On Behalf of | Oct 1, 2022 | Insurance Disputes

A reliable supply chain is the backbone to all businesses. However, many of us don’t grasp the scope of our modern global supply chains until problems arise.

A factory fire around the world could cause your shipping times to balloon by months. A shipping delay in Africa could cause a chain reaction where your shipments are delayed indefinitely.

As a result, many business owners are turning to business interruption insurance to cover those supply chain issues, but is that something this type of insurance covers?

Is it really that big of an issue?

Yes. According to recent reports, business leaders in the United States ranked supply chain disruptions as their top risk in 2022.

For example, the Winter Storm Uri’s supply chain disruption cost the automotive sector $210 billion alone. And, the Suez Canal blockage in 2021 backed up over 350 shipping vessels for a week.

And that’s to say nothing of our recent global health emergency.

It is no wonder that 45% of businesses report suffering from supply chain disruptions.

Does business interruption insurance cover losses due to supply chain issues?

Yes. If your business has been negatively impacted by the current fragmented and stretched state of our global supply chain, look to your business interruption insurance. This type of insurance provides coverage for financial losses for just these situations. Recovery may be limited to those costs associated with damage repair and loss of use.

Not the only option

Contingent business interruption insurance is also available. This is usually purchased with your ordinary business interruption insurance. This insurance covers you for the termination, suspension or reduction in your operation because of physical loss or damage within your supply chain.

For example, in Winter Storm Uri, if a pipe burst somewhere and damaged a critical piece of machinery for one of your suppliers, the damage could delay the end product. This would qualify businesses affected for payouts from their contingent business interruption insurance.

Of course, these are only two of the types of insurance you likely have. As business owners, you likely have many more, and if you receive denials, you can always hire a San Francisco attorney to fight them.