Following are two examples which explain the application of the Customer's and Suppliers' Premises Endorsement: -
Example 1
In Winter 2001 a major fire occurred at a meatworks in Brooklyn, Victoria, Australia.
News reports focused on the significant property damage, hazardous fumes and loss of employee jobs. The fire had ramifications beyond the Brooklyn meatworks.
Some meat processors experienced an increase in supply as alternative facilities were sourced to replace the processing capacity lost at Brooklyn.
The capacity of other meat processors was limited. Suppliers and customers of the Brooklyn meatworks were adversely affected.
Suppliers including farmers incurred additional transport costs to redirect livestock to other facilities.
Customers such as small goods manufacturers which normally obtain their product from the Brooklyn meatworks were unable to obtain their usual volume or it may only be available at an increased price.
Some of the Business Interruption losses experienced by suppliers and customers of the meatworks in Brooklyn were insured as some of these parties held a Business Interruption cover containing a Customers and Suppliers Endorsement.
Example 2
In scenes reminiscent of the Victorian Gas Crisis which occurred on 25 September 1998 a fire broke out at the Moomba gas refinery in South Australia on New Year's Day in 2004.
This put discussion of national energy strategies back on the agenda and highlighted the need for adequate disaster recovery plans that include public utilities and customer/supplier considerations.
News reports indicated gas production from the plant was significantly reduced with an expected 8 weeks before full capacity could be restored. This had a significant, adverse impact on businesses in South Australia and New South Wales. The State Government of South Austalia ordered fifty of the largest gas users in South Australia to cease operations.
Force majeure contracts were under the spotlight and legal actions were considered.
The Santos outage highlighted the impact of losses throughout the supply chain.
Some Policyhoders initially examined the public utilities extension on their Industrial Special Risks insurance policies. This may respond but some policy wordings may limit the cover to a government owned organisation or one that is adjacent to the damaged property i.e. the Moomba gas field.
Some customers or suppliers of Santos had to cease operating. Other businesses could import part or fully manufactured products and continue trading, albeit at reduced levels. In some instances busiensses further along the supply chain were adversely affected. The financial losses associated with this interruption could be insured with an appropriately worded Customers' and Suppliers' Endorsement.
Author
Published with permission of Claim Solutions Pty Ltd.
Insurance Policy
Country: - Australia
Policy Description: - Mark IV Industrial Special Risks policy.
Insurer: - Various.
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