The current economic climate. “Will tomorrow be as good or as bad as today?”

1. The current economic climate.“Will tomorrow be as good or as bad as today?” CILA Annual Conference 2009 Business Interruption Specialist Interest Group THE PHANTOM MENACE II Harry Roberts BSc (Hons), FCA, FCILA, MAE

2. The Phantom Menace II • Phantom I – 1999 CILA Masterclass • Supply Chains • Proximate cause

3. The Phantom Menace I(Supply Chains) • Procurement was new • Partnership was the buzz phrase • Contract or no contract? • Fines and penalties • The conundrum

4. The Phantom Menace II(Supply Chain) • Little has changed – but we now all know what’s coming • Is the “Menace” covered as an ICW anyway? • Is the potential Gross Profit loss covered?

5. The Phantom Menace II • Consequential loss – Loss resulting from interruption of or interference with the Business carried on by the Insured at the Premises in consequence of loss or destruction of or damage to property used by the Insured at the Premises

6. The Phantom Menace II • Reduction in Turnover – The sum produced by applying the rate of Gross Profit to the amount by which the Turnover during the Indemnity Period shall fall short of the Standard Turnover in consequence of the Incident.

7. The Phantom Menace II • Standard Turnover – The Turnover during that period in the 12 months immediately before the date of the incident which corresponds with the Indemnity Period • BUT subject to:

8. The Phantom Menace II • Other Circumstances Clause - To which such adjustment shall be made as may be necessary to provide for the trend of the Business and for variations in or other circumstances affecting the Business either before or after the Incident which would have affected the Business had the Incident not occurred, so that the figures thus adjusted shall represented as nearly as may be reasonably practicable the results which but for the Incident would have been obtained during the relative period after the Incident.

9. The Phantom Menace II • Indemnity Period - The period beginning with the occurrence of the Incident and ending not later than the Maximum Indemnity Period thereafter during which the results of the Business shall be affected in consequence thereof.

10. The Phantom Menace II • Contrast with US covers • Conclusion – UK cover is broader than US cover, and necessarily includes customer reaction and necessarily includes customer reaction

11. The Phantom Menace I(Proximate Cause) • Building industry strike • Recalcitrant landlord • Policy wording • But where does “but for” end? Insured Loss? Covered Loss? Actual Sales Economic impact Actual Sales Economy Date of Loss Actual Sales Actual Sales

12. The Phantom Menace II(Proximate Cause) • Conclusions from scenarios • Attempts to mitigate that are frustrated do not give rise to a new loss brought about by an intervening cause – it is the original loss that is continuing to be suffered. • Events that could have occurred anyway should not be attributed to the mitigation strategy. • The Insured are required to carry out or permit action which may be reasonably practicable to minimise any interruption, ie to mitigate. Events outside their control, but which are a consequence of the damage merit consideration as being BI related. • Suggestions as to further refinements would be most welcome