Originally published in Advisen FPN - May 16, 2011.
Although the media properly has focused primarily on the human tragedy caused by the recent earthquake and tsunami in Japan, much also has been written about the potential economic ripple effect of those events, particularly within the auto industry. The auto industry is particularly susceptible to losses caused by supply chain disruptions in Japan because of the industry’s reliance on imports of component parts from that country. The scope of potential auto industry losses is currently unknown due to the fluid nature of the situation, and commentators are not unanimous in their assessments. They generally agree, however, that the ripple effect could last for a while.1
Auto industry companies may be able to protect themselves from at least some of these losses by accessing various types of coverage that likely are included within their “first-party” property damage policies.2 Significantly, these policies often can provide coverage for much more than physical damage to property, such as lost profits; indeed, companies may be able to obtain coverage even if they did not sustain any damage to their own facilities, if they have experienced, or experience in the future, an interruption of their business due to property damage sustained by a supplier or customer.3
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