Contingent business interruption, or CBI insurance is an extension to other insurance that reimburses lost profits and extra expenses resulting from an interruption of business at the premises of a customer or a supplier.
Unlike typical business interruption insurance that compensates a policyholder for a loss resulting from damages to its own property, CBI allows for a transfer of risk of certain losses to the property of a third party.
Companies often purchase this type of insurance as an extension or add-on to their standard commercial property insurance. It is also known as contingent business income insurance or dependent properties insurance.
CBI insurance applies if there is:
Direct physical loss or damage to a dependent property (e.g., supplier or customer or potentially neighbouring properties);
The loss or damage is caused by a covered cause of loss; and
The loss results in a suspension of operations at a covered location.
While the concept of contingent business interruption is simple enough, determining what is a covered cause of loss is a more complicated assessment.
Identifying coverage restrictions of CBI insurance is important, as the breadth and scope of coverage can vary between policies. There are also coverage limits on most CBI insurance policies.