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Adams and Reese attorneys Chris D’Amour and Brooke Duncan teamed up to co-author “Insurance Considerations for Companies That May Face Strikes,” published in Law360.
In an “Expert Analysis” article, D’Amour and Duncan discuss protective options that are available to businesses to possibly mitigate the financial impact of strikes. These proactive measures include purchasing specialized strike insurance coverage; adding strike provisions to existing policies; contingency planning; alternative supply sourcing; and risk assessment.
The recent surge in major work stoppages in the U.S., combined with the nationwide dockworkers' strike that occurred earlier this month, highlights the growing importance of strike preparedness for businesses.
Below is the article reprinted with permission from Law360.
Insurance Considerations For Cos. That May Face Strikes
By Chris D’Amour and Brooke Duncan (October 23, 2024)
Earlier this month, one of the largest strikes in 2024 made headlines when 45,000 unionized dockworkers, members of the International Longshoremen's Association, went on strike and temporarily halted operations at 36 U.S. ports.
These are the same ports where the U.S. receives from waterborne vessels, more than 75% of its bananas, 85% of its canned food and 80% of its chocolate. Don't leave a nation without chocolate.
This strike of enormous magnitude threatened the stability of our global supply chain if it were to last for a long period. Thankfully, the strike only lasted three days as the ILA and United States Maritime Alliance Ltd. agreed to suspend any strike until Jan. 15, 2025, giving the sides more time to negotiate.
The U.S. had 33 major work stoppages involving a total of 458,900 workers in 2023 — three times the number of workers in 2022 and the largest number of major work stoppages since 2000, when there were 39 major strikes, according to the U.S. Department of Labor. A major work stoppage involves 1,000 or more workers and lasts at least one shift during the work week, as defined by the U.S. Bureau of Labor Statistics. Over the last 20 years, there has been an average of 16.7 major work stoppages annually.
Although the dockworkers' strike was short-lived and paused (it still could happen early next year), there are important lessons and takeaways businesses should consider in the event of a strike. There is strike insurance coverage available to companies, and there are proactive steps businesses can take to attempt to protect themselves in the event of a strike.
Keep in mind that strike insurance coverage is very specific and only tailored to companies that have unionized workers and those that are concerned of a potential strike by their employees and potential disruptions that can occur due to labor disputes. Most companies that purchase some sort of strike insurance coverage are businesses that have had strikes occur and faced disrupted operations and loss of income.
What Types of Strike Insurance Coverage and Policies Are Available?
It is important to note most commercial insurance policies — often constructed as all risk policies where all perils are covered unless the peril is specifically excluded, compared to named peril policies where only listed perils on the policy will be covered — do not cover financial losses from strikes.
Strike insurance must be purchased before a strike begins. A specialty strike insurance coverage may be purchased separately such as in the form of strike, riot and civil commotion coverage, which guards against the financial losses incurred from property damage or theft during such events but also ensures businesses can manage potential liabilities arising from injuries to employees or customers. Coverage can include the likes of forgone income and lost profits due to reduced production or sales, increased expenses from hiring temporary workers or using alternative means for production, employee wages, and even costs associated with temporary relocation.
If the insured business's employees stage an ongoing strike, the related daily loss of income may be covered up to the limits of the policy. Strike insurance policies often have specific terms and conditions, potential waiting periods, coverage limits and exclusions. For example, strike coverage typically begins after a 24- to 72-hour waiting period deductible. The cost of strike insurance coverage can vary depending on factors like the company's size, industry and the likelihood of strikes in the region. Strike insurance can also be specifically added to existing commercial policies. For example, companies can purchase an add-on to business interruption insurance to compensate them for lost profits and expenses due to a strike-related shutdown.
If your business depends on the operations of others, consider contingent business interruption coverage to protect against losses if their operations are disrupted by a strike. Or strike coverage can be added to property insurance to cover damage to goods or equipment at the facility, as well as theft or vandalism that may occur during a strike. Or it can be added to cyber liability insurance in the case that security measures are compromised, or data breaches occur during a strike or disruption in work. In the case of the nationwide dockworkers' strike, port operators and businesses at these ports could also consider increasing cargo insurance limits to account for potential delays, demurrage charges, and the higher value of goods in transit during a strike.
The practice of risk assessment should always be the primary focus of your business when considering insurance. Conduct a thorough risk assessment to identify potential vulnerabilities and develop a comprehensive risk management plan that may include the purchase of strike coverage in the various ways discussed above.
Discuss your specific needs and find a policy that best suits your situation. And if you decide to purchase, carefully review the policy terms and conditions to ensure that it provides adequate coverage for your specific needs. After purchase, regularly review your insurance coverage to ensure it aligns with your changing needs and the evolving risk landscape.
Proactive Steps That Businesses Can Take If There Are Strike Concerns
Businesses can proactively conduct contingency planning if their employees are unionized and/or company management is worried about a potential employee strike.
Consider lining up nonunion labor to temporarily replace unionized workers in the event of a strike. Consult with the economic development chamber in your area or an industry trade association to seek out skilled labor to perform the jobs required.
Having alternate supply sources is critical for any business. Find other vendors for aspects of your business who can provide similar services, and develop a contingency plan for sourcing alternative suppliers to minimize the impact of a strike. For example, if a customer buys engine parts from a unionized supplier, and that supplier's employees go on strike, the customer should plan to work with an alternate supplier, temporarily, as a backup plan, in case of a strike.
Conclusion
The recent surge in major work stoppages in the U.S., combined with the nationwide dockworkers' strike that occurred earlier this month, does highlight the growing importance of strike preparedness for businesses, whether that be additional insurance coverage or not.
Businesses can mitigate the financial impact of strikes by purchasing specialized strike insurance coverage or adding strike provisions to existing policies. Additionally, proactive steps such as contingency planning, alternative supply sourcing and risk assessment are essential for minimizing operational disruptions and maintaining business continuity.
By understanding the available insurance options and implementing effective risk-management strategies, businesses can better protect themselves from the adverse effects of strikes.
Chris D'Amour is a partner and Brooke Duncan is counsel at Adams and Reese LLP. The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.