Contingent Business Interruption

What happens when something occurs outside of your control? This question is answered best in insurance through a coverage called "Contingent Business Interruption". The word "contingent" can be defined as "a group united by some common feature, forming part of a larger group". In business this comes down to the day-to-day operations and all of the various factors that can impact them.

Imagine all the utilities were cut off to a business for three weeks. Without power and water most businesses could not operate and would be forced to close their doors. This wouldn't be covered by a typical insurance policy because no damage to property would have occurred.

​Contingent business interruption is designed to pick up those exposures where a business is "contingent" on others to operate. This coverage looks at a couple of key points which we will explore in a little more detail:

1. ​Physical Damage: If a supplier has a loss and all of the inventory is ruined, a company should not be penalized. Unfortunately business owners get so caught up in their own operations that they forget to consider the operations of those around them. The truth is, the suppliers insurance policy will cover their operations but It wont cover their clients. This means business owners should have contingent business interruption insurance to protect themselves against events such as utility interruption by the city or a loss to one of their suppliers.
   
2. Covered Incidents: One key consideration to a business interruption is the type of claims that will be covered. As you can imagine things like bankruptcy or miss-deliver do not qualify as covered incidents under a contingent business interruption policy. Having a good understanding of what would and would not be covered is essential to every business owner.
3. ​Time:  What qualifies as a business interruption?  ​Some businesses make 100's of dollars a day and others make 100's of dollars a second. The period of time in which coverage applies is an important consideration for contingent business interruption.

​Getting contingent business interruption insurance can be very important for your business. Talk to your insurance broker about contingent business interruption insurance and learn about the potential disruptions to your business.

​What do you think?