Japan Earthquake a Wake-Up Call for Contingent Business Interruption Coverage

Japan Earthquake a Wake-Up Call for Contingent Business Interruption Coverage

Adjusters InternationalDisaster Recovery Consulting

By Donald S. Malecki, CPCU

In the wake of the recent catastrophic earthquake and tsunami in Japan, and the aftermath of radiation leaks from that country’s nuclear energy plants, repercussions are being felt not only in that country, but worldwide.

Although only 4 percent of Japan’s foodstuffs are imported by U.S. businesses, other U.S. industries have come to rely on Japan not only as a sole supplier of products necessary to make finished goods for export or sale, but also as the sole purchaser of U.S. products and technical assistance.

U.S. businesses adversely affected by this unprecedented disaster...

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As the 8.9 magnitude earthquake that struck Japan on March 11, 2011 continues to teach the world a multitude of lessons, one of them is a clear reminder to companies of the need for contingent business interruption coverage.

In addition to the tragic loss of life caused by the tremors and resulting 23-foot tsunami, the decimation included numerous Japanese businesses whose timetable for return to productivity will be uncertain for some time. The interruption or slowdown is having a dramatic effect on those who rely on them for parts and materials, including American companies and Japanese firms with operations in the United States.

As author and insurance expert Donald Malecki points out in this article, “As has become evident from this Japanese catastrophe with its worldwide repercussions, insurance is not the only way to treat risk. In a perfect world, businesses would not become dependent on single sources. Unfortunately, that is not always possible. In that case, foresight is necessary to identify the potential causes of loss and to determine how best to handle them.”

For more on this important wake-up call, read on.

—Sheila E. Salvatore, Editor