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.

What is a consequential loss example?

Consequential Loss — a loss that arises as a result of direct damage to property—for example, loss of rent. Some types of consequential loss are insurable under standard direct damage or time element coverage forms; others are not.

What is consequential loss in a contract?

Generally, consequential loss (also called indirect loss) is the non-dominant loss from a breach of contract. They are probable consequences or losses contemplated by the parties at contract formation. In contrast, normal loss (or direct loss) naturally arises from a breach.