From the May 2011 issue of Treasury & Risk magazine

The Nuclear Exception

Triple disasters in Japan complicate sorting out causality for contingent business interruption insurance claims.

Most large companies insure against business interruption. The savvier ones, particularly those with sprawling global supply chains, also have contingency business interruption riders to protect against events that impact the plants of their suppliers or customers. In March, when one of the largest earthquakes in history struck Japan, followed by a 60-foot tidal wave that crippled a nuclear generating plant, many probably thought they were covered. Not so fast. Because a nuclear facility was involved, companies whose Japanese suppliers had problems may have a tough time getting compensated. In most countries, including the U.S., insurers exclude nuclear events from coverage.

“The extent of coverage that a company has will depend upon the proximate cause determined for each claim,” warns Michael Korn, managing principal at Integro Insurance Brokers. Many policies also exclude earthquakes, he adds. 

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