Business interruption insurance not likely to cover airline disruptions due to volcano

It is unlikely that business interruption insurance policies will respond to the disruption to airspace as a result of the volcanic ash, according to Aon Global Risk Consulting.
Flight bans were put in place in Europe on April 14 when an Icelandic volcano erupted, creating large clouds of volcanic ash that drifted across Europe.
It is estimated that the “Icelandic volcano crisis” cost airlines more than $1.7 billion in lost revenue as of April 20, according to the International Air Transport Association (IATA).
When disruptions were at their greatest, between April 17 and April 19, lost revenue reached $400 million per day, IATA said.
“At the worst, the crisis impacted 29% of global aviation and affected 1.2 million passengers a day,” Giovanni Bisignani, IATA’s director general and CEO, said in a release.
“The scale of the crisis eclipsed 9/11 when US airspace was closed for three days.”
But, business interruption policies usually only kick in when there is physical damage, Stephen Cross, CEO of Aon Global Risk Consulting, said in a release.
“If ash falls to Earth and lands on a business’ premises and causes damage – for example blocked-up air pipes could lead to an explosion – then that could trigger a resulting business interruption policy,” he said.
“It is important to note, however, that insurance policies vary and a firm should always ensure they study their own policy language in determining whether they are able to claim on their insurance cover,” he cautioned.
Firms that have invested in rigorous business continuity planning will have an alternative way of providing their product or service in times such as this, Cross said.
These firms “will come out the other side of a lengthy disruption in a better position than those who haven’t.” he said,
“Similarly, companies in competition to those most adversely affected that have planned for ways to cope with significant and sudden increases in demand will tend to flourish,” he added.