Canadian Underwriter

Japan ‘super cat’ event likely to trigger causation disputes

April 12, 2011   by Canadian Underwriter

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The insurance industry, and the loss adjusting community in particular, should be concerned about causation disputes and wide area damage arising from the Mar. 11 ‘Super Cat’ event in Japan, according to Crawford & Company.
In a white paper, Japan Earthquake & Tsunami, Crawford outlines the various complications the Mar. 11 Japan earthquake, tsunami and subsequent nuclear contamination leak might have on the global insurance and reinsurance industry.
The paper’s author, Clive Nicholls, senior vice president of global markets at Crawford, points to lessons learned from claims arising from Hurricanes Katrina, Rita and Wilma, as well as the more recent earthquakes in Chile, New Zealand and the storms in Queensland.
All of these tragedies have raised the thorny issue of causation disputes in a wide area of damage, the paper notes.
“The devastating nature of the tsunami [in Japan] has caused a significant level of physical damage in the region, but there is certain to be disputes over the causation,” Nicholls wrote. “The damage may have been caused by the surge and subsequent flood but was the causation the earthquake?
“The same can be said for the contingent business interruption and the causation trail which may well include a lengthy supply chain and multiple insured and underwriters.”
The impact the nuclear contamination will have on the global markets is also a wild card, Nicholls reported.
The American Nuclear Insurers (ANI), which provides reinsurance for nuclear sites around the world, said its reinsurance policy with Japan Atomic Energy Insurance Pool includes property liability coverage for some of the country’s plants and third-party liability for all of Japan’s nuclear plants, Nicholls wrote.
The immediate crisis appears to not create any liability for ANI, because its Fukushima Daiichi reinsurance policy carves out earthquake and flood damage.
“The long-term impact of the Japan disaster on the nuclear industry remains unknown,” the report continues. “The entire insurance industry now anticipates a hardening of rates at least in Japan and possibly worldwide… For the nuclear industry, it is too soon to tell.”
Nicholls added that the radiation has severely hampered the response from the loss adjusting community.