Indirect losses that are the result of physical damage and adversely affect normal business operations may be considered consequential losses. Coverage of consequential losses may include compensation for ongoing obligations such as salaries and fixed operational expenses.

When can you claim consequential loss?

A breach of a contract will likely result in a loss for one or all parties to the contract. The loss in a contract which both parties reasonably foresee at the time they enter into the contract is called consequential loss and is typically limited or excluded from liability in the contract.

Is consequential loss covered by insurance?

A consequential loss is an indirect loss, as opposed to a direct loss, and so careful research when selecting insurance is imperative, as not all policies will provide this kind of cover. Insurance may also be able to compensate for consequential loss even when no direct losses have been incurred.