Business interruption cover is designed to protect a business for a financial loss incurred because it cannot trade for a period due to loss or damage to the business itself from an interruption covered by the policy.
For some businesses, the COVID-19 pandemic interrupted trade and caused financial loss but since 2005-06, losses arising from quarantinable or infectious diseases were specifically excluded from this cover and insurers have argued that it was never their intent to cover claims arising from a global pandemic.
On November 18, 2020, the New South Wales Court of Appeal determined in two separate test cases, that COVID-19 is not a disease declared to be a quarantinable disease under the Quarantine Act and therefore, the exclusion in the infectious diseases benefit does not apply.
So what does this mean for you?
Unfortunately, this does not mean that all claims for COVID-19 related business interruption losses must now be paid – it simply means that businesses holding policies with the Quarantine Act exclusion may have one less hurdle to overcome in presenting their claim.
Insurers will continue to argue that their policies do have exclusions relating to pandemics and that it was never the intent to cover this type and scale of event. A High Court challenge to the decision is likely, which will delay any claim settlements for some months yet.
In addition, policy coverage varies from insurer to insurer and some policies do have appropriate wording to deny this type of event.
What you can do
- To find out more about this issue please visit https://www.insurancecouncil.com.au/issues-submissions/bi-test-case
- If you have business interruption cover and believe you have suffered a financial loss from COVID 19, please contact your broker to discuss your policy coverage and potentially lodge a notification with your insurer.
There will be further communications to come on this matter, in the meantime, please contact your broker to discuss your particular circumstances.