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Home » Watch: Why Companies Are Considering Supply Chain Disruption Insurance
VIDEO

Watch: Why Companies Are Considering Supply Chain Disruption Insurance

January 24, 2022
Robert J. Bowman, SupplyChainBrain

Robyn Anderson, attorney in the insurance and recovery practice of Lathrop GPM, and Rick Bridges, vice president and account executive for supply chain and logistics with Lockton Companies, discuss how recent events have awakened companies to the need for business interruption insurance.

Multiple disasters over the last several years, including vessel casualties, bad weather and supply chain congestion, have made companies aware of the need for additional protection against the impact of those events, says Bridges. Anderson further cites COVID-19 as the cause of shutdowns, labor shortages and other “ripple implications” that have caused companies to take a fresh look at their business-interruption policies.

Some shippers and carriers that have suffered losses due to these events will find that they aren’t protected by their insurance policies. Anderson says standard property policies require physical damage in order to trigger coverage. Mere delays caused by the pandemic or transportation congestion are, for the most part, not covered. Bridges echoes the need for some kind of physical damage to cargo, such as spoilage of perishable goods due to shipment delays.

“Acts of God” provisions in insurance policies address the impact of natural disasters that are beyond the control of affected supply chains. (A labor dispute that shuts down a factory, for example, wouldn’t qualify under the definition.) Again, though, some physical damage is usually necessary to trigger such protection. But Bridges says that paying closer attention to the contractual obligations of suppliers and vendors can “lessen the blow” from serious disruptions.

Both Anderson and Bridges say their companies are increasingly seeking the protection of business-interruption insurance, and moving away from a “price-only” metric, even if certain events aren’t covered. “We can’t provide a wholesale solution,” Bridge says, “but awareness has certainly helped.”

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