Far From the Earthquake, Insurance Claims May Be Triggered

    By Finley Harckham, Partner, Anderson Kill & Olick, P.C.

So far, it seems that the U.S. can be thankful that the tsunamis stemming from the terrible earthquake that hit Japan will not do damage on our shores.  In our global economy, though, many U.S. businesses will find their operations affected, either because they have facilities in Japan or because key suppliers or customers are located there. Those businesses -- if they have earthquake and tsunami coverage -- should look to the business interruption and contingent business interruption coverage in their property policies. 

Business interruption or "BI" coverage is designed to protect businesses from losses stemming from unavoidable interruptions in their daily operations.  BI coverage may apply in a variety of circumstances, such as a forced shut-down, a downturn in business due to the damage to premises, or a substantial impairment in access to, a business’ physical plant or premises. Also potentially relevant: coverage for evacuation by order of civil authority, triggered when authorities close off access to a damaged area. Typically, the order must result from property damage of the type covered by the insurance policy but, importantly, damage to the insured’s own property is not required to trigger coverage.

Because the economic effects of the tsunami are likely to span much of the globe, businesses nationwide and worldwide may be eligible to file contingent business interruption claims - also a standard provision in many property insurance policies, though many small businesses are not aware of it.  Contingent BI covers policyholders that did not suffer physical damage but still lost revenue after a property loss crippled a major supplier or customer.  For example, if Japanese ports are incapacitated for a significant period and key supplies or manufacturing components cannot be obtained, companies should document any loss in revenue and give notice asap.

When the damage is not in your backyard, the tendency is not to think about insurance.  But in this small world of ours, businesses of all sizes are affected by events far away. When those events cause a loss of income, managers should train themselves to think "insurance" and develop a reflex to give notice to any insurance company that may potentially provide coverage.

Please contact me you would like to speak about claims they may potentially emerge from the earthquake and tsunami.

Finley Harckham is a senior litigation shareholder in the New York office of Anderson Kill and serves on the firm's Executive Committee. He regularly represents and advises corporate policyholders in insurance coverage matters.  He has successfully litigated, arbitrated and settled hundreds of complex coverage claims.  His areas of particular expertise include property loss, business interruption, directors and officers liability, professional liability and general liability claims.

Mr. Harckham also founded two Anderson Kill non-legal subsidiaries: Anderson Kill Insurance Services, LLC, and Anderson Kill Loss Advisors, LLC.  Those companies provide insurance consulting and property and business interruption loss quantification and settlement services.  He is on the editorial advisory board of Insurance Law360 and was cited by Legal 500 as being one of the leading practitioners in the United States in the field of insurance and reinsurance for natural disasters.

Mr. Harckham also has extensive experience in the field of international arbitration.  His arbitration clients include government contractors, consumer products companies and manufacturers which Anderson Kill has represented in a wide range of disputes involving, among other things, service contracts, the purchase and sale of components, raw materials and products, and licensing agreements.  He has successfully prosecuted and defended arbitrations in European countries and the United States under the London Arbitration Act, and the AAA, ICC and UNCITRAL arbitration rules.

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