Contingent Business Interruption Losses Arising out of the Kumamoto Earthquakes

Contingent Business Interruption Losses Arising out of the Kumamoto Earthquakes
Riker Danzig Insurance Update April 26, 2016

On April 14, 2016, a 6.2 magnitude earthquake struck Japan’s Kyushu region, followed by a 7.0 magnitude earthquake in the same region two days later, near the city of Kumamoto.  Together, these earthquakes and scores of significant aftershocks have resulted in numerous fatalities and injuries, significant property damage and the interruption of business, services and travel throughout the region.  Like the earthquake and tsunami that struck Japan in March 2011, the recent earthquakes Japan will no doubt give rise to significant supply chain interruptions and economic losses throughout the world.  Indeed, on April 25, 2016, General Motors announced that it will idle plants in Tennessee, Ohio, Kansas and Ontario, Canada, due to expected shortages of parts manufactured by Japanese suppliers.  Similar scenarios are likely to play out in various industries, globally.  Insurers and reinsurers can thus expect to see a significant increase in contingent business interruption claims.  

Riker Danzig’s insurance group has significant experience dealing with the coverage issues that typically attend such claims, including choice of law, the interpretation of time element coverage provisions, tier analysis, interdependency and tie ratio analyses.  For a concise discussion of many of these issues, see Brian E. O’Donnell’s and Caroline S. Brizzolara’s “Selected Insurance Coverage Issues:  Contingent Business Interruption Losses in a Global Economy,” published in International Insurance Law Client Strategies, Thomson Reuters/Aspatore 2015.  For a PDF of the article, click here.