ADJUSTERSINTERNATIONAL.COM 3 How can a business protect itself when a major supplier is shut down by fire or other peril, so that the business cannot obtain needed materials to operate? What about the shutdown of a major customer? ANSWER: There is no automatic coverage for either of these cases under standard business income or extra expense coverages, unless the supplier or customer is an affiliate or subsidiary of the insured. (In that case, blanket business income coverage could apply.) To establish coverage for income losses due to shutdowns at non-owned locations, carriers add “dependent properties” or “contingent income” coverage based on two endorsements developed by the Insurance Services Office (ISO) or proprietary equivalents: • The CP 15 08 Broad Form, which extends the firm’s own business income insurance to include one or more of the supplier’s or customer’s properties, with the same limits of insurance as at the firm’s location; and • The CP 15 09 Limited Form, which provides separate limits of income insurance when an insured does not have its own coverage or is using a different insurer to cover the dependent location. Contingent income coverage can be extended to four types of dependent properties: 1. A contributing location, a supplier to the insured; 2. A recipient location, a major buyer or user of the insured’s output; 3. A manufacturing location used by an agent of the manufacturer; and 4. A “leader” location that attracts patrons to other businesses, such as an “anchor store” in a shopping mall. Dependent locations coverage contributed to unprecedented levels of business income insurance losses in the wake of the September 11th attacks on theWorld Trade Center. For enterprises that did not have the coverage, the disruption was even greater. A final note: Contingent business income insurance does not apply to suppliers of utility services … Contingent business income insurance does not apply to suppliers of utility services (electricity, water, steam, heat, communications, etc.).
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