PAGE 3 The damage does not necessarily have to occur at the insured location to trigger coverage. Business income coverage can be triggered by damage that occurs at a nearby location resulting in an order by civil authorities closing off access to an insured location (as when police might close off an area following a riot or natural disaster). BI coverage typically commences 72 hours after a suspension begins and continues for three consecutive weeks unless a longer period of coverage has been purchased. Coverage for ‘contingent’ locations For purposes of supply chain risk management, it is important to be aware that BI coverage can be extended to compensate for losses and extra expenses due to damage at “dependent” or “contingent” locations, such suppliers, distributors, buyers, or venues. Typically, the damage must be caused by a peril insured against under one’s own property policy, unless a separate policy is purchased. With income coverage for dependent locations, an insured business is at least partially protected from the effects of physical damage that shuts down a critical business partner. Thus, if a supplier suffers windstorm damage, or a buyer is paralyzed by strikes and civil commotion, the insured would be compensated (subject to a deductible and limit of insurance), presuming those perils are covered under its property policy. Considerations and options for contingent BI coverage are explored thoroughly in a companion publication from Adjusters International, Adjusting Today, titled “Contingent Dependent Properties Insurance: Understanding the Basics.” In the report, the author covers: • The distinction between “manufacturers or contributors” of goods to insureds, “recipients” (buyers) of the insured’s products, and “leader locations” that attract customers (such as anchor stores in shopping malls). • The distinction between primary and secondary contingent locations, and the related distinction between direct and indirect suppliers. The report also explains that BI coverage does not extend to losses due to interruptions in electricity, water, internet, and other utility services; those exposures are addressed by separate utility interruption endorsements. Transit insurance The transportation of products and their components is a central consideration in supply chain risk management, and various forms of insurance are available for covering shipments on land, sea, and air. These include: • Trip transit insurance — Coverage for individual shipments, commonly purchased by or on behalf of organizations that do not ship property regularly; Supply Chain Risk Continued Insights for Your Industry PROTECTING YOUR PROPERTY 512.328.1851 | benekeai.com Sheila E. Salvatore, Editor | Editor@AdjustersInternational.com Copyright © 2022 Adjusters International, Ltd. All Rights Reserved. Insights for Your Industry® is published as a public service by Adjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases. E15-1025
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