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2011 Japan Earthquake and Thailand Floods

On March 13, 2011 a 9.0 magnitude earthquake rocked the Pacific coast of Japan and, in conjunction with the Tsunami that followed, caused widespread devastation. The damage to public infrastructure and private property resulted in the closure of industrial operations throughout Northern Japan. Meltdowns and related explosions occurred at a nuclear facility in Fukushima, leading to power grid failures and a mass evacuation. More than 4 million households were left without electricity or water.  Global economic losses were estimated to exceed $300 billion, which made the 2011 Japan Earthquake the costliest natural disaster in world history.

Months later, Thailand experienced its worst flooding in 50 years. Between July and October of 2011, floodwaters inundated more than 22 trillion acres of land, more than two thirds of the country.  The flood crisis impacted more than 4 million households and 13 million people.  Dozens of factories were flooded and closed as a result of the flooding, which caused an estimated $45 billion in global economic losses, making the Thailand Floods the fourth costliest natural disaster in world history.

The catastrophic property destruction and displacement of people in both Japan and Thailand caused massive supply chain disruptions, especially in the automobile and computer technology industries. In the aftermath and against this backdrop, many United States companies made contingent business interruption insurance claims for economic losses sustained in 2011 and 2012, purportedly arising out of these commercial chain disruptions. 

Zelle represented many clients in investigations, negotiations, mediations, arbitrations, and litigation over these contingent business interruption claims.  Issues presented included:   

Reported Cases

American Axle & Manufacturing, Inc. v. XL Insurance America, Inc. et al., (Circuit Court of Wayne County, Michigan). The insured, which produced axles for use in automobile manufacturing, made a multi-million dollar claim for contingent business interruption, claiming Thailand Floods damaged a Thai automobile seat manufacturer, causing manufacturer to fail to deliver seats to the same automobile manufacturer to whom the policyholder sold its axles. Without the seats, the manufacturer had no use for the axles, and consequently canceled its orders. A dispute arose over whether Contingent Business Interruption coverage for losses caused by damage to property of “indirect” suppliers and customers applied when physical damage was sustained by the supplier of an insured's customer as opposed to the supplier of a supplier, or a customer of a customer. Zelle assisted in the litigation and related ADR process and eventual resolution. 

Delphi Automotive Systems v. ACE American Ins. Co., et al., (Circuit Court of Oakland County, Michigan). The insured supplied products to automotive manufacturers, and claimed those orders declined following the Japan Earthquake because other suppliers to those same manufacturers suffered property damage and could not deliver their products. The parties disputed whether Contingent Business Interruption coverage applied to instances of damage to the property of a supplier to the insured's customer, and whether such damage actually caused any loss of profits. Zelle assisted in the litigation, ADR process and eventual resolution.

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