The Current Litigation is Not the Whole Business Interruption Story
COVID-forced remote work offers insights in the business interruption exposure
Many, many restaurants, travel businesses and other companies are waging battle in the courts over business interruption claims. There is another side of the business interruption exposure not talked about now, though: interruption due to cyber breach.
The argument over physical loss or damage is in the courts, and we are carefully watching the decisions.
But, for many remote or IT-centered companies the bigger exposure is loss of IT infrastructure, IT functionality and loss of data — the other business interruption exposure. The kinds of companies in this segment are law firms, online stores, online publishers, and any others that depend mostly on online transactions or client interactions.
For these companies, COVID has shown us the physical premises is far less valuable than the computer systems. The companies survived, and even thrived, without access to the physical place of business. Based on the knowledge gained from the sudden COVID experiment we’ve been able, for some companies only, to downgrade the premises exposure; premiums can be reduced.
At the same time, we’re paying more attention to the cyber business interruption exposure. This exposure comes from hacking and rogue employee action against the system and/or the data which causes a loss in business activity, revenue, and net income. This kind of loss is not covered by traditional business interruption insurance , but rather by cyber insurance.
For the IT-centric companies we can refocus on their unique business interruption exposure.
So, rather than fire or hurricane (or in addition to them), we work on IT security, contracts involving IT services, and finally cyber insurance.
What we had thought was totally over-optimistic thinking has turned out to be the reality. Some companies can move forward after losing their physical base with barely a blip. Testing this under real conditions would have been far too risky. COVID forced it, and it turned out to lead to surprising insights.
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(c ) Licata Risk & Insurance Advisors, Inc. 2020
Frank Licata
[email protected]; 617.718.5901
Mar 15, 2021
