Business interruption or industrial special risk insurance policies may not respond to business losses caused in the recent COVID-19 outbreak, and related events, because the virus lacks a physical “trigger” causing loss, is an exclusion under a policy – either specifically (in policies underwritten following its spread), or indirectly (such as under “pandemics” or some other general exclusion).
Can I recover my business losses?
Whether you are able to recover your businesses’ losses, depends on your insurance policy. The first step should be to read your policy wording, and determine the nature or cause of your losses to see if its covered (i.e. an “insured event”). Your insurance policy will generally comprise of a policy schedule sent to you ahead of policy renewals (which is generally a shorter document and identifies the policy cover and limits), and a more detailed policy wording (which is a lengthier document and provides further details as to your insurance coverage and exclusions). Bear in mind that your insurer or broker may not send to you your policy wording, and you might need to request a policy wording from them to properly interpret your policy.
Generally, insurance policies are of two types – claims made and notified, or claims which apply when certain circumstances arise (i.e. a “trigger”). Some business interruption policies require a physical trigger, before a policy comes into operation, and covers you.
That’s only the first step, you should then determine whether there is any specific or broad exclusion to the otherwise covered insured losses under your policy. The present COVID-19 outbreak was declared a Listed Human Disease (“Human coronavirus with pandemic potential”) and “infectious disease” under the Biosecurity Act 2015 (Cth).
However, if the losses suffered under your policy do not require a physical trigger, and are caused either by an “infectious disease” or a Government instituted public emergency shutdown, those losses could, in fact, be covered by your policy (provided they are not otherwise excluded). But beware, those causes could just as easily be exclusions under a policy, as opposed to insured events.
But there’s a long way to go from there before – if – you get any money.
You may face a fight with your insurer over what in fact caused the losses, and whether those losses are excluded under the policy – and given the pressure on insurers, there may be delays in claims handling. Ultimately, you may be required to commence proceedings against your insurer for them to enforce their obligations to you under your policy.
What can I do now?
There are generally timeframes within which you need to make a claim under your policy, or notify your insurer. Further, you generally need to maintain the insurance policy at least for the period within which a claim is made. You also are likely required to take steps to “mitigate”, i.e. reduce your losses, wherever possible. It’s a good idea to keep track of these steps, along with recording with as much detail as possible your financial losses, and how, when, and why they occurred.
It’s a lot to take in, but ask your broker, your insurer or us – we’re here to help.