Depending on policy language, trade disruption insurance, business interruption coverage or even traditional first-party property coverage could come into play for firms hit by the Los Angeles port strike and anticipated strikes on the U.S. East and Gulf coasts, observers say.

Marsh Inc. said in a report Thursday that port labor strikes threatened by longshoremen along the U.S. East and Gulf coasts could cause crippling disruptions to organizations' inventories and supply chains. An eight-day strike in the neighboring ports of Los Angeles and Long Beach ended Wednesday.

Experts note that traditional marine, property and even certain trade disruption policies may exclude coverage for financial losses, providing coverage only if there has been actual damage to goods.

Joe Sheridan, New York-based senior vice president-marine for Lockton Cos. L.L.C., said because a disruption to the supply chain is involved, the most likely coverage would be trade disruption insurance, which would cover profit losses, among other financial losses.

“It's sold by marine markets but is not a traditional marine placement,” Mr. Sheridan said. He said this coverage generally is obtained through Lloyd's of London.

However, one such trade disruption policy issued by Lloyd's syndicates excludes coverage for financial losses caused by strikes except where a strike results in physical loss or damage.

It all depends on the policy language, said Linda D. Kornfeld, an attorney with Jenner & Block L.L.P. in Los Angeles.

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“The point of trade disruption insurance is, in many instances, to fill gaps,” she said. While “some trade disruption forms may require physical damage, others don't and are specifically marketed to help companies that have concerns with respect to supply chain issues or disruptions to their business because of events that aren't traditionally covered under the policies they would typically purchase.”

Some policies are specifically marketed to address situations such as a strike, she said. “These policies are specialty coverage, and they're often tailored to particular businesses, and so you may see a policy that requires actual physical damage and others that don't,” said Ms. Kornfeld.

However, Drew Olson, Chicago-based senior manager of insurance claims services for BDO Consulting, warned these policies are expensive. “My perception is … companies would rather manage their supply chains than pay those premiums.”

But coverage also may be available in other policies, according to Ms. Kornfeld. She said the first step firms should take is to explore some of the traditional coverages they probably already have in their insurance portfolios.

“I would check out the first-party property and business interruption policy to see if there are any provisions within that policy” that would recover lost profits, because the company needs to receive goods to run its business — and those goods are sitting on a ship in port and the company cannot get access, Ms. Kornfeld said.

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“It is possible there may be language in that policy that would allow me to make an argument in favor of coverage,” even though these policies typically apply only when there has been damage to the property that has occurred at or near the company's premises, Ms. Kornfeld said.

Similarly, the typical cargo policy may not provide coverage unless there is property damage. “However, what I do is read insurance policies to see if there may be unique langue contained in the policy that provides an opportunity to obtain overage that at first blush might not be considered to exist,” said Ms. Kornfeld.

She said some cargo policies may contain the arcane “sue and labor clause,” which allows the policyholder to recover amounts they spent to prevent future property damage. For example, if a policyholder “is waiting on perishable items, and the ship is sitting in a port, and those perishable items cannot be removed from the ship, money may be needed to be spent” to redirect the ship to another port “where the perishable items can be removed from the ship before they perish. Those amounts may be recoverable under a cargo policy,” even though there is no physical damage, said Ms. Kornfeld.

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“I would recommend strongly to any company that has an issue because of what has happened in the last week in Los Angeles, and what happens in the next period of time (elsewhere), to scrutinize their cargo policy and determine the extent to which there is coverage, even though there isn't actual damage to property,” said Ms. Kornfeld.

Meanwhile, Zurich Insurance Co. Ltd.'s Supply Chain Insurance policy offers an all-risk policy designed to cover supply chain disruptions, including those caused by strikes, said Linda Conrad, New York-based director of strategic business risk.

The policy, which was first introduced in Europe about four years ago, can provide up to $100 million in coverage per supplier. Deductibles start at 10%, and there is a wide range of premiums, Ms. Conrad said.

In addition, Allianz S.E. also offers a “nonphysical” business interruption policy that would provide coverage for labor strikes, according to a New York-based spokeswoman for the Allianz Global Corporate & Specialty unit.