Insurance Claims for Supply Chain Aftershocks of the Japanese Earthquake and Tsunami

This article also appeared in The National Law Journal.

While the brunt of the suffering from the massive March 11 earthquake and tsunami has been in Japan, the economic aftershocks will be global, and many U.S. companies will suffer serious economic consequences. 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 will lose access to markets in Japan.

To cover losses suffered as a result of damage to third party property, most commercial property insurance policies include contingent business interruption and contingent extra expense insurance. Though these coverages are narrowly defined and may be subject to sublimits, they can be very valuable in the event of major disruptions to trade.