...for the earthquake, the tsunami would not have occurred.
A lot is at stake here, too, because earthquake deductibles in Japan are likely to be very high. Therefore, application of the deductibles is likely to be subject to argument.
The problem is that a business would have had to identify in advance the potential for such a disaster, which is probably something that few did since the entire world was shocked by the intensity and aftereffects of this catastrophe. With foresight on risk management, however, having identified that possibility of an earthquake and tsunami, the next step would have required evaluating the maximum loss potential and then determining how much insurance would be necessary during the period a dependent business was out of commission.
To the extent that there are U.S. businesses — with single-source suppliers from Japan — covered by standard Insurance Services Office (ISO) property insurance, the coverage portfolio would have had to be modified with an international form of contingent business interruption and/or extra expense coverage.
The Business Income Dependent Properties — Limited International Coverage Endorsement CP 15 01 04 02, as its name indicates, is intended to provide loss of business income coverage in connection with contributing locations or manufacturing locations. Both of these locations are defined in this endorsement by the term “dependent property.” Thus, a contributing location means “property operated by others whom you depend on to deliver materials or services to you, or to others on your account.” Amanufacturing location means “property operated by others whom you depend on to manufacture products for delivery to your customers under contract of sale.”
Whatever location is designated, i.e., contributing or manufacturing, a limit of insurance also is required to be shown on this endorsement. The limit applies in addition to the business income limits applicable to the named insured’s own premises which, of course, also is necessary.
The fact that a business maintains a special causes of loss form (all risks) on its property exposures does not mean that the same causes of loss have to be applicable to dependent properties. This endorsement can be made applicable to the Basic, Broad or Special Causes of Loss Form. Space is allotted to also list other endorsements supplementing the covered causes of loss, such as earthquake and flood.
To compensate for this limited international coverage, the covered territory condition in the Commercial Property Conditions...