ADJUSTERSINTERNATIONAL.COM 3 company had to incur extraordinary expenses regaining its shelf space in the stores. A U.S. company’s European facility producing metric standard products suffered a total loss, and management decided to fill its sales orders with nonmetric machines produced in the United States. The firm was eventually able to restore normal sales levels, but then discovered that in order to comply with its service and warranty program, it had to stock nonmetric repair/replacement parts at the European location for an extended period of time. The resulting loss for these warranty parts was unanticipated and one for which the company was not covered. A U.S. firm relied heavily on a foreign supplier for parts critical to its domestic production. A major earthquake destroyed the plant of the supplier. Because the U.S. company did not have coverage for this type of contingent business interruption loss, they were devastated. The fact that the insured didn’t anticipate this type of indirect business interruption loss ended up costing them a great deal. A condominium association that suffered $250,000 worth of damage to an asbestos roof spent approximately $1 million to dispose of the damaged asbestos — and their loss was only partially covered. The process of removing hazardous materials can sometimes be more costly than installing the materials themselves. A hotel casino under construction could not open on time because a hurricane delayed by four months the delivery of steel needed for its construction. The company’s insurance policy did not provide coverage for materials not on the premises at the time of loss. Consequently, the late opening — created by the delayed delivery of the steel — caused the owner to sustain an extensive loss in earnings as well as additional The most important part of establishing a comprehensive disaster recovery program should be adopting the philosophy that you can best protect your firm not just by assuming that you’re covered, but by digging deeper into potential problems and exposures … interest expenses. These indirect losses were never anticipated. Another hotel lost the majority of its tourist business due to publicity surrounding a recent hurricane. Because the hotel itself was not damaged, their income loss was not covered. Rarely is coverage found for indirect losses like this. But this case drives home the point that when you assume your business is covered for all losses, you could be in for an unpleasant surprise. A company restored its manufacturing facility within three months of a major fire loss, but it took six months for the firm to return to its preloss sales volume. The business interruption loss sustained during the fourth, fifth and sixth months following the reopening was not covered. This is not an unusual situation in that policies normally provide coverage only for a reasonable restoration period. However, companies can protect themselves by adding extended period of indemnity coverage to their policy.
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