There’s no doubt that the COVID-19 pandemic has caused (and continues to cause) a lot of damage to businesses Australia-wide. As such, many organisations that have Business Interruption Insurance policies have asked the valid question if they could make a claim.
Insurance companies argue they do not have the financial strength and resources to cover the catastrophic losses a pandemic can cause. They claim that whether the policy contains an exclusion relating to the Quarantine Act 1908 or Biosecurity Act 2015, the intention is clear: Business Interruption Insurance was not designed to cover the loss of income arising from a pandemic disease that is listed under either Acts of Parliament.
In our previous post, we mentioned that NSW the Court of Appeal ruled against the insurers and in the favour of policyholders. Essentially, it has unanimously decided that quarantine-type exclusions do not apply to COVID-19. Similarly, in Britain, hundreds of thousands of small businesses in the UK are expected to be receiving Business Interruption payouts after a ‘historic victory’.
What does this mean for Australian businesses?
At this point in time, it isn’t the end of the story for both insurers and businesses just yet. The Insurance Council of Australia (ICA) has sought an appeal, and according to insurancenews.com.au, a second test case, which involves nine separate small business claim disputes lodged with the Australian Financial Complaints Authority (AFCA), may not bring clarity well until next year.
According to the article, “ICA says the second test case will determine the meaning of policy wordings in relation to the definition of a disease, proximity of an outbreak to a business, and prevention of access to premises due to a government mandate, as well as policies with a hybrid of these types of wordings.”
As per our first post, we advise to watch this space. With the second test case predicted to extend to 2022 (or beyond), businesses looking to make COVID-19 Business Interruption Insurance claims will unfortunately have to wait for further news.
For Crucial Insurance clients: if you have already submitted a claim under your Business Interruption Insurance policy, we will continue to monitor developments and work with your insurer on your claim.
If you have not lodged a claim under your Business Interruption policy, we suggest that you contact us so that we can discuss the process for lodging a claim notification.
This article was written by Tony Venning,
Managing Director at Crucial Insurance and Risk Advisors.
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