Business interruption policy holders urged to contact their insurance brokers

The Insurance Council of Australia (ICA) has urged small businesses to submit a claim against their business interruption (BI) cover through their broker or insurer if they believe their policy responds.

This follows the High Court’s decision to not allow an application to appeal the judgment of the NSW Court of Appeal in the first Business Interruption (BI) test case. The Court of Appeal’s November 2020 judgment found that references in insurance policies to a now-superseded Act of Parliament did not allow insurers to deny BI claims made because of the COVID-19 pandemic.

However the ICA has warned that the finalisation of many claims may still not take place until further clarity is provided by a second test case, underway now in the Federal Court. This second text case will determine the meaning of policy wordings around disease definition, COVID outbreak proximity, the impact of government mandates, and other policy wording matters.

However, this does not prevent policy holders from lodging a claim now. Acknowledging the High Court ruling ICA CEO, Andrew Hall said, “While we are disappointed, this decision on the first test case provides us with certainty and allows the industry to focus on the issues to be resolved through the second test case underway in the Federal Court of Australia.

“We encourage policy holders who are considering lodging a claim to contact their broker or insurer, and make sure they are keeping all the necessary paperwork. It is the position of the ICA that policyholders affected by COVID shutdowns are entitled to lodge a claim with their broker or insurer against their business interruption cover.

“As we are also nearing the end of the financial year, lodging a claim in this matter can be complex and requires gathering evidence – that’s why policyholders should start that process now.

“Once finalised, insurers are committed to applying the courts’ decisions in both test cases in an efficient, transparent, and consistent way when assessing claims.”

If a claim is denied by an insurer, the Australian Financial Complaints Authority (AFCA) can make binding decisions on claims up to $1.085 million free of charge for policyholders, in contrast to the substantial fees sought by class action funders and lawyers.

Further guidance on making a BI claim is available on the AFCA and ASIC websites, and general information on this issue can be found on the ICA’s website.