Insurance and Supply Chain Disruptions During Conflict

JD Supra Trade Law

Published March 12th, 2026

Detected March 13th, 2026

Summary

Pillsbury Winthrop Shaw Pittman LLP published guidance on navigating insurance coverage for supply chain disruptions during conflict, specifically referencing the Iran War. The article highlights potential coverage gaps in business interruption policies and advises businesses to proactively build records and review policy wordings.

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What changed

This guidance from Pillsbury Winthrop Shaw Pittman LLP, published on March 12, 2026, addresses insurance implications for supply chain disruptions arising from geopolitical conflicts, using the Iran War as a case study. It emphasizes that many business interruption (BI) and contingent BI claims hinge on the precise trigger language within property and BI policies, which often require direct physical loss or damage. The article warns that "pure delay" disruptions, common in conflict scenarios where shipments are diverted or delayed without physical damage, may fall into coverage gaps if policies exclude delay or require physical loss.

Businesses experiencing or anticipating such disruptions are advised to immediately review their actual policy wordings, including BI, contingent BI, extra expense, cargo, and political risk policies. Key actions include identifying trigger language, relevant definitions (e.g., "dependent property"), documenting causation contemporaneously, and checking notice requirements. Proactive record-building and a thorough understanding of policy terms are crucial for potentially recovering losses related to conflict-driven supply chain interruptions, as standard forms may not adequately cover these scenarios.

What to do next

Review actual policy wordings for property/BI, CBI, extra expense, cargo/inland marine, and political risk/war-risk placements.
Identify key trigger language and definitions within policies, such as 'dependent property' and 'covered cause of loss'.
Document causation contemporaneously and check policy notice requirements.

Source document (simplified)

March 12, 2026

Conflict Premium: Insurance and Supply Chains During the Iran War (Part 2)

Joseph Jean, Meaghan Murphy Pillsbury Winthrop Shaw Pittman LLP + Follow Contact LinkedIn Facebook X Send Embed

Many business interruption (BI) and contingent BI disputes don’t turn on the headline event. They turn on the trigger: what, exactly, counts as a covered loss at a covered location caused by a covered peril.

Takeaways

Many property/BI programs respond best to traditional perils and often require direct physical loss or damage to trigger BI.

If the policy requires direct physical loss or damage as a trigger, or if “delay” is excluded unless tied to an insured peril, you may be staring at a coverage gap.

If you’re in the middle of disruption, the best time to build the record is now. In the first installment of this series, we focused on the operational side of the Iran war: chokepoints, reroutes, airspace constraints and the pricing ripple effects. Here’s the insurance translation: Before you can measure the loss, you need to classify it.

Is this a property damage event? A denial-of-access problem? A seizure/detention scenario? A contract frustration loss? Or a “pure delay” disruption where nothing is physically damaged—but everything is late? The answer usually dictates which policy you look to first.

Property and Business Interruption (BI), Including Contingent BI (CBI)
Many property/BI programs respond best to traditional perils and often require direct physical loss or damage to trigger BI. Supply chain losses are frequently “contingent”—tied to a supplier, customer or logistics node. Some programs add contingent BI, ingress/egress, civil authority or supplier extensions, but the trigger language and the list of covered locations (named vs. unnamed suppliers) can be decisive, and the loss must typically arise from something that is covered by the base policy.

Watch for common friction points: (i) Whether delay alone is covered, (ii) whether the disrupted supplier/location is within the policy’s definition of a dependent property, and (iii) whether exclusions such as war, terrorism or sanctions remove the very peril you’re worried about.

Why “Pure Delay” Is the Repeat Offender
One of the most common fact patterns in a Middle East escalation is also one of the hardest to insure under standard forms: a shipment diverts or waits, a delivery window slips and costs rise—but there is no physical damage.

If the policy requires direct physical loss or damage as a trigger, or if “delay” is excluded unless tied to an insured peril, you may be staring at a coverage gap. That’s why it’s critical to read the contingent BI and extra expense extensions as closely as the base BI grant.

A Practical Checklist
If you’re in the middle of disruption, the best time to build the record is now. Practical steps that tend to matter:

Pull the actual wordings (not just certificates) for property/BI, CBI, extra expense, cargo/inland marine and any political risk/war-risk placements.
Identify the trigger language and the definitions that matter most (e.g., “dependent property,” “covered cause of loss,” “period of restoration,” “civil authority,” “ingress/egress”).
Document causation contemporaneously (carrier advisories, port updates, supplier notices, routing decisions, inventory impacts).
Check notice requirements early. In fast-moving conflicts, timing can decide coverage—especially where war-risk cancellation or high-risk zone provisions exist.
Track costs separately (spot freight, war-risk surcharges, alternative sourcing, expediting, storage). Clean cost records are often the difference between settlement leverage and settlement frustration. Conclusion If your BI/CBI grant still hinges on “direct physical loss or damage,” a perfectly documented delay can still be uninsured. The quickest win is to pull the endorsements now and map your dependent locations before a claim forces the issue.

( This article is the second installment in a four-part series examining insurance considerations brought to the forefront by recent and ongoing events in Iran. Part 3 will examine political risk insurance and political violence products that are designed for the edge cases that standard property programs often exclude.)

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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