Insurance Coverage for the Ripple Effect From the Japanese Tsunami

Westlaw Journal

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PUBLISHED ON: March 30, 2011

Although the disastrous Japanese earthquake and tsunami thankfully had very little physical impact on the United States, many companies here will suffer serious economic consequences in the weeks and months to come. Damage to Japanese manufacturing facilities, roads, railroads and ports will result in unfulfilled orders for products and component parts, leaving some American companies to scramble to find alternate suppliers, and to pay higher prices. Other corporations here will lose access to markets in Japan.

Many companies have insurance coverage for their lost profits resulting from such disasters, even when there is no damage to their own property. This coverage is called “contingent business interruption” and “contingent extra expense” insurance and is commonly included in commercial property policies.

These types of insurance can be very valuable in times like these, but the coverage is narrowly defined and may be subject to sublimits.