Case Study: Business Interruption Calculations – Manufacturing

Overview

Any manufacturer that experiences an insurance event faces two issues: having to quickly rebuild their production capabilities and managing customer expectations and orders. In this case study, a world-renowned Ontario-based lighting manufacturer experienced a destructive fire in their computer numeric control (CNC) machine, while at the same time experiencing large increases in orders and production requests.

 The challenge

The manufacturer was challenged to show it had experienced economic losses resulting from the fire despite continuing to receive production orders from clients around the world. Until the lights left the facility, the orders could be cancelled because of delays due to the fire and consequent outage. Added to this was the risk long-term customers would find other suppliers for the same reason. Insurance company accountants also questioned the increasing orders and trends, even though the CNC machine was down.

 The Solution

Turnaround time on new orders was extended due to the fire, despite production restarting within a month when the replacement CNC machine was installed. The MNP team was able to use the after-fire information to show that, while production started up relatively quickly, and orders continued to be received, they would never fully make up the order numbers they should have had.

 The Outcome

The strategy of waiting for the new CNC machine to be in place and showing the order data allowed the team to confirm some orders placed were later withdrawn, with customers seeking other suppliers. This provided confidence in our model of losses and allowed our client to claim their economic damages resulting from the fire.

Businesses aren’t cookie cutter. Neither is their insurance coverage. MNP’s Insurance Advisory team provides thorough analysis, insightful reporting and credible testimony which will help you resolve claims with confidence. We also work with you to ensure you have the appropriate coverage and your insurer treats you fairly.