Coverage for the Thailand Floods: Learning Lessons From Earlier Catastrophes


As the flooding news from Thailand drags on, businesses must look to the lessons that past disasters can teach us - the Sendai earthquake and tsunami last March (the "Sendai Event"), Hurricanes Katrina and Rita, and even 9/11. Thailand is a critical link in international supply chains, notably automotive and computer components. Thus, the current flooding will again focus policyholders' attention on the important role played by Contingent Business Interruption (or Contingent Business Income) ("CBI") insurance, as the Sendai Event did.

CBI insurance is designed to cover losses caused by damage to or destruction of the property of suppliers and customers of the policyholder, which the policies call "Dependent Properties." Of course, the insurance companies that sell this coverage try very hard to avoid paying CBI claims, particularly when they are faced with a large catastrophic event, like a natural disaster, which leads to a large number of similar kinds of significant claims. True to form, the insurance industry's response to CBI claims from the Sendai Event has been to push back aggressively to minimize coverage. Responses to early Thailand Flood CBI claims have been the same.

But policyholders don't have to take "no" for an answer. Reed Smith's Insurance Recovery Group has some of the most able and experienced counsel for CBI claims in the world. Depending on the situation, they can advise clients behind the scenes or, if needed, come to the forefront, litigating against insurers. Since insurers routinely work with their coverage counsel from the inception of major events like these, policyholders are well-advised to do the same.

Insurers have been making four primary arguments to evade the Sendai Event claims, all of which we can expect to see again for the Thailand Flood claims.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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