FOLLOW US

This is the case of Blockheads LLC v. Flexport Inc. et al., in the U.S. District Court for the Middle District of North Carolina.

As the world continues to grapple with the challenges posed by COVID-19, small businesses are facing unprecedented difficulties in maintaining their operations. One such business, Blockheads LLC, a maker of wooden building block Advent calendars, has found itself caught in a legal battle over insurance coverage for delayed shipments of its product. The company has accused its supply chain managers, Flexport, and Zurich North America Inc., of failing to follow through on the promises made within the marine cargo insurance policy issued by Flexport's insurance subsidiary and Zurich.

Blockheads LLC, owned by The GoodKind, a company that specializes in making Advent and Easter blocks and Sabbath boxes intended to help people practice their faith, had intended for its first large-scale commercial season to take place in December 2021. To protect itself from significant business losses that could be incurred even with slight shipping delays, the company purchased a marine cargo insurance policy from Flexport. However, when delays and subsequent losses occurred, Blockheads LLC claims that Flexport and Zurich misrepresented the extent of coverage the policy offered and fell short of the efforts expected by the company.

The company has also informed the court that it never received a complete copy of the policy, making it difficult to understand the reasons for the coverage denial. Blockheads LLC argues that its policy does not contain the "loss of market caused by delay(s)" exclusion cited by Zurich in their denial of coverage. Without a full copy of the policy, the company said it has to guess how Zurich came to this conclusion.

The delays and subsequent losses incurred by Blockheads LLC have been devastating for the small business, as it had to rely on a salvage sale of the delayed product to mitigate losses. This has resulted in a material loss for 2021 on its financial statements that restricted its ability to gain financing for the following year.

The impact of COVID-19 on the economy has proven to be a major challenge for small businesses like Blockheads LLC. The company's attorney, James R. Lawrence III of Envisage Law, stated that the impact of supply chain delays on small businesses can be catastrophic, as they often do not have the resources to absorb such losses.

Blockheads LLC is now suing Flexport and Zurich for over $400,000 in damages, claiming that their actions have deprived the company of the funds necessary for its financial future. The company has also accused the insurers of bad faith efforts, claiming that their ambiguous communications and inconsistent actions have been inconsistent with the portions of the policy that the company does have.

This case highlights the importance of understanding the fine print of insurance policies and the potential consequences of supply chain delays for small businesses. It also serves as a reminder that insurance bad faith can have a devastating impact on a company's bottom line and future prospects. As the world continues to navigate the challenges posed by COVID-19, it is crucial for businesses to be aware of their rights and to take steps to protect themselves against potential losses.