...extra expenses will depend on the scope of the flood coverage and the coverage territory. Since the DIC policy is not standard, each one has to be tailored to fit the particular business, to the extent an insurer is willing.
Fire is a cause of loss that is seldom, if ever, excluded. For example, whether a business selects the Basic, Broad or Special Causes of Loss Form to apply with its dependent property coverage, fire would be a covered cause.
Fire often remains a covered cause even when accompanied by a cause excluded or not otherwise covered. It is a cause of loss that falls within the category of an ensuing loss. For example, both the Causes of Loss — Broad and Special Forms — exclude earth movement consisting of earthquake, landslide, mine subsidence, and earth sinking (other than sinkhole collapse). An accompanying provision states, however, that if any one of those excluded causes results in a fire or explosion, the insurer will pay for such loss, but only to the extent of the fire or explosion.
This means that even if a U.S. business did not have the foresight to purchase earthquake or flood coverage in relation to its business income and/or extra expense dependent properties coverage, it is likely to still have coverage when the dependent property was also damaged or destroyed by fire. Since fire was widespread following the catastrophic event in Japan, some coverage for businesses will likely apply.
Those U.S. businesses that have come to depend on single Japanese sources for their supplies or for their market of goods or services — and have arranged for some kind of international dependent properties coverage —may have the insurance necessary to continue what is likely to be a long, disruptive course of business.
As has become evident from this Japanese catastrophe with its world- wide repercussions, insurance is not the only way to treat risk. In a perfect world, businesses would not become dependent on single sources. Unfortunately, that is not always possible. In that case, foresight is necessary to identify the potential causes of loss and to determine how best to handle them.
Hopefully a U.S. business chose wisely and selected earthquake and/or flood coverage as causes of...