Last year, we wrote an article published in the Corporate Counselor that discussed the coverage consequences of business interruptions caused by unprecedented flooding of the Mississippi River. In the article, we discussed the fact that the flooding could cause supply chain interruptions, which could result in very large losses to companies that lost access to suppliers or could not get their products to market. We also discussed the fact that many companies have insurance coverage for “contingent business interruptions,” which may cover all or part of the losses caused by disruption of river traffic.
Last week, the Washington Post published an article warning of severe economic fallout potentially on the horizon because of the crippling drought that has severely lowered water levels on the Mississippi River. The article pointed to the fact that the “stubborn draught that has gripped the Midwest for much of the year has left the Mighty Mississippi critically low – and it will get even lower if the Army Corps of Engineers presses ahead with plans to reduce the flow from a Missouri River dam.” The article raised the specter that a dip in water levels could mean a closure of the Mississippi River, and thus the same types of losses and disruptions that arose from flooding last year. The Washington Post quoted a senior vice president of the Waterways Council (a public policy organization that represents ports and shipping companies), as saying: “This could be a major, major impact at crisis level . . . . It is an economic crises that is going to ripple across the nation . . . .”
If the Mississippi River becomes impassable, companies again may need to look to their insurance to ameliorate the financial impact. The same issues that we discussed in our article last year again will come to the forefront. As we discussed in our article, companies need to review their policies to determine whether they might have coverage, act quickly to ensure compliance with all time-related policy conditions, prepare to counter the arguments that insurers might raise to evade their coverage obligations, and take care to track losses and damages to enable companies to present their claims effectively.
Posted: Nov 20, 2012