Glossary
Contingent business interruption, defined
An extension of income coverage that responds when a company's revenue stops because of physical damage at someone else's premises: a key supplier, a major customer, or a neighboring anchor that draws its foot traffic.
In practice
The standard income form requires damage to your own property. This extension names or describes dependent properties and pays lost income when a covered peril damages one of them. Suppliers that cannot deliver, customers that cannot receive goods, and a leader property such as a mall anchor are the three usual categories. Carriers ask for a list of dependent locations and often limit it to direct suppliers, not the supplier's supplier. Some forms require the dependent property to have suffered a peril that would have been covered under your own policy. Manufacturers with a sole-source part and retailers in a center that depends on one anchor are the typical buyers.
A worked example
Suppose a cabinet maker buys all its hardwood from one mill, and the mill burns. The shop has no damage but has no material for six weeks and loses $30,000 in profit. With the mill scheduled as a dependent property under a $100,000 sublimit, the policy pays the lost income. Hypothetical.
Applies to: Business Owners Policy (BOP)Agribusiness & Farm Insurance