Defense Counsel Journal - International Association of Defense ...

The Global Supply Chain Page 427stress injury. 54 The plaintiff relied uponexpert opinions of testimony in support ofher claims. The trial court concluded thatwhile plaintiff’s expert was qualified toprovide an expert opinion, his depositiontestimony failed to establish that he couldrender a reliable expert opinion as to thecause of the plaintiff's injury.On appeal, the Second Circuit notedthat expert testimony was only admissiblewhere it was both relevant and reliable. Inupholding the decision of the trial court,the court stated, “given the paucity ofdetail explaining what methodology[expert] employed in reaching hisconclusion that Turrentine's keyboardusage was a substantial factor in causingher symptoms, it was not an abuse ofdiscretion for the district court to excludehis testimony as to causation.” 55III. Shifting the Risks of TradeDisruptionA. Mechanisms to Transfer RiskTraditionally, companies haveattempted to lower their risk or exposureof supply chain interruptions by procuringBusiness Interruption (BI) coverage orContingent Business Interruptioncoverage (CBI). BI coverage is generallycontingent upon actual physical damageto the commodity or cargo. CBI providessimilar coverage to the extent the loss iscaused by a covered peril.BI coverage is not responsive to thevariety of perils that can affect the globalsupply chain system. The following brief54No. 98-7942, 1999 U.S. App. LEXIS7765 (2nd Cir. Apr. 13, 1999).55 Id.scenario illustrates gaps that may exist inBI coverage:Pear Inc. is an American companythat manufactures cell phones. Thephones are assembled in Mexico and usevarious components manufactured inChina, Thailand and Vietnam. A typhooncauses serious flooding in Vietnam,washing out critical roadways. As aresult, the components made in Vietnamsit in the plant, undamaged, but unable tobe shipped until the roadways arerepaired. In order to maintain productionand sales, Pear, Inc. finds a replacementmanufacturer to obtain the requiredcomponent, increasing costs by 30%.In this hypothetical, the actualcomponent did not sustain any physicaldamage. The plant could continue tooperate and manufacture the requiredpart, but the flood damage prevented, orsignificantly delayed, the ability to shipthe part for use in assembling the phonefor eventual sale. Under the typical BIprovision, the lack of “physical damage”would preclude coverage for Pear’seconomic losses.For Pear, the fact that there was nophysical damage certainly does mean ithas not sustained a significant loss. Still,the absence of such actual physicaldamage would preclude coverage under atypical contingent BI from beingtriggered. In this situation, Pear wasunable to transfer this risk and must bearthe subsequent losses. Of course, to theextent the flooding actually causeddamage to Pear’s components, thisanalysis would change. Dependent uponthe language of the policy, the resultinglosses would be covered and the risk ofthis loss properly transferred to theinsurer. The resulting question is what