Metro Articles

Japan's Tragedy A Reminder of Need for Business Interruption Insurance

Nathan Smith Wednesday, March 23, 2011

Businesses that purchase products or supplies from Japanese companies or have operations in Japan have been riding a bumpy road since the 9.0 magnitute earthquake hit. Many businesses here in the US were hard hit, too. Take for example electronic manufacturers. Japan is the one of the world's leading suppliers of gold semiconductors, a computer component used in all kinds of electronic goods. After the earthquake, many companies were left scrambling to find new sources for thier components, causing huge gaps in production.

"It's inevitable that there will be hundreds of millions of dollars of losses to American companies for sure," said Finley Harckham, senior partner for Anderson Kill & Olick, a law firm in New York.

Harckham says businesses are now trying to figure out how long the disruption will last and if they have adequate inventory to cover that time period.

Insurance experts agree that the biggest challenge when it comes to business interruption is educating clients on why they need the coverage. Many insureds seem to be focused on what's inside thier building, and not how it can be affected by outside changes. Customers may still believe that everything is covered under a standard commercial package policy, when in fact, it is not.

The catastrophe in Japan is just one more example of why business inturruption coverage is important to businesses - is it important to yours?

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