As the owner of a storage warehouse there are many risks that can cause your business to have shut down its operations. Primarily, most businesses are concerned with damages to their immediate property and how it affects their company’s ability to remain open. However, if you’re dependent on a third party supplier or customer to keep your business running and something happens to said third party, you may need a specialized policy apart from your moving and storage insurance. When this happens, you need to make sure you have contingent business interruption insurance to cover any lost costs that occur while your doors are shut.
What is contingent business interruption?
Contingent business interruption insurance (CBI) is a policy that reimburses a company for lost profits and continuing expenses due to a loss suffered by one or more of its supplies or customers. CBI is different from regular business interruption coverage because it is dependent on losses to the property of a third party, not your actual business property. A CBI policy will be necessary when:
1. Direct physical loss or damage to a dependent property (supplier or customer)
2. The loss or damage is caused by a covered cause of loss
3. The loss results in a suspension of operations at a covered location.
Who needs CBI insurance?
Foreign suppliers and customers have become very important for businesses, creating interruption exposures that did not exist in the past. However, even if your supplies and customers are local, you may still need CBI anyway. In order to determine whether or not you need CBI, you should identify your supplies and customers and how they may impact your operations. Ask yourself these questions:
1. Can I survive a temporary production stoppage by one or more suppliers? For how long?
2. Do I have alternative supplies?
3. Do I rely on one or a few customers to purchase the majority of my products?
Keep in mind that most CBI policies do not cover losses related to earthquake and flood damage since they are not normally covered under a regular property insurance policy.
At Wolpert Insurance & Risk Management we want owners to understand that, if anything ever happens to either their building or with a third party, we can help. For more information on CBI or your mover’s insurance, give us a call today.