As companies around the globe experience supply chain disruptions, some can turn to their insurance policies for coverage, but experts foresee increased underwriting scrutiny and an uptick in litigation from policyholders trying to recoup losses. In an interview with Law360, Michael Gehrt said, “undoubtedly, there will be litigation” over whether some of these losses are covered. Gehrt has been fielding calls from clients experiencing supply chain issues and asking if their contingent business interruption policies provide coverage.

Similar to the business interruption lawsuits filed by businesses in the wake of COVID-19, policyholders have filed complaints seeking supply chain disruption coverage under contingent business interruption policies for COVID-19 damage experienced by their purveyors. “The same argument that applies for why there is a direct physical loss — as a result of the presence of a virus — applies for a supplier location,” he said. “There are already lawsuits pursuing that theory. There’s certainly less on the contingent [business interruption] side than what I’d call the typical first-party property damage, but there are companies [filing lawsuits] out there.”

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