A fire at a key supplier can shut down a manufacturer even if its own premises are untouched. Contingent business interruption coverage protects against lost income that results from physical damage at the premises of a supplier, customer, or other dependent property.

The policy still requires that the damage be caused by a peril insured under the insured’s own property form. Coverage may be limited to named dependent locations or extended to any supplier or customer. Limits are often lower than primary business interruption limits, and waiting periods commonly apply.

Supply-chain risk has elevated interest in this coverage. Underwriters request information about critical dependencies and may impose sub-limits or higher retentions. Claims require proof that the interruption was a direct result of the covered damage at the contingent location and careful measurement of the resulting income loss.

• Covers income loss from damage at dependent premises
• Requires a covered peril at the supplier or customer
• Often subject to sub-limits and waiting periods
• Addresses supply-chain interruption risk