The current strike by the International Longshoreman’s Association is disrupting supply chains and raising concerns around goods that are in transit. As ports along the East and Gulf Coasts face an operational standstill, businesses are grappling with how to mitigate potential losses. The halting of operations at key ports not only delays shipments but raises questions about the protection of goods in transit.
When thinking about risks that could impact a business, most cargo owners focus on natural disasters, theft, or accidents. However, as we’ll likely see over the next few weeks, strikes and labor disputes present a unique risk that can disrupt global supply chains, leading to significant financial losses. For businesses that rely on the smooth transportation of goods, such as manufacturers, retailers and distributors, a strike at a critical point in the supply chain can be devastating.
Strikes should always be a consideration when analyzing business risks. Whether it’s dockworkers, longshoremen, truck drivers, or warehouse workers, a strike can stop the movement of goods. This can delay shipments, spoiling perishable goods, more storage costs and even lost sales or missed contract deadlines.
The impact of strikes on businesses can manifest in various ways:
While these risks are real, many business owners assume that their cargo insurance will automatically cover such losses. That’s not always the case.
To address some of the risks posed by strikes and other social disruptions, cargo owners should revert to the Strikes, Riots and Civil Commotions (SRCC) endorsement/coverage of their insurance policy. This standard extension to the policy’s SRCC absolute exclusion provides protection for physical damage to cargo caused directly by labor unrest, including strikes.
For example:
However, it is important to note that SRCC endorsement/extension doesn’t cover losses due to delays caused by strikes. If your goods sit in port because longshoremen are on strike, and your shipment is delayed, resulting in financial losses, SRCC coverage won’t compensate for these losses unless the cargo itself is physically damaged. For cargo owners concerned about the impact of delays, bespoke coverage can be added to the cargo policy. Such coverage can address specific situations where perishable goods or time-sensitive shipments deteriorate or are rendered unsellable due to delays beyond the control of the business, and/or coverage to address various additional expenses that may be incurred due to the strike.
With the strike underway, here are a few key steps to take to mitigate strike risks:
Review your cargo insurance: Understand what your standard cargo policy covers and, more importantly, what it doesn’t. Discuss bespoke coverage available with your WTW Broker. If you deal with perishable or time-sensitive goods, in the future, consider adding such coverage to protect your business from financial losses caused by delays, including those resulting from labor unrest.
Diversify supply chains: To reduce the impact of strikes, consider diversifying your logistics network. Having alternate ports, shipping routes, or suppliers in different locations can help mitigate delays caused by strikes in a particular region.
Monitor labor relations: Keep a close eye on labor conditions in the regions where your goods are shipped. Early warnings of potential strikes can help you adjust your logistics and make contingency plans before a disruption occurs.
Strikes represent a significant business risk for cargo owners, with the potential to cause delays, financial losses and operational disruptions. While the standard cargo policy excludes coverage for strike-related losses, there are options such as SRCC Endorsement /extension and other bespoke coverages that offer protection. By understanding the limitations of your current coverage and proactively exploring extensions or additional policies, you can minimize the financial impact of strikes on your supply chain and business operations in the future.
We encourage you to consult with your WTW cargo insurance expert to tailor coverage to your business's specific needs, ensuring you’re prepared for the unexpected.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.
