There has been a great deal of commentary in the news about the effects of Coronoavirus on businesses, and whether these disturbances (such as event cancellations, forced closures of premises, and impacts on suppliers’ premises located overseas) are covered by business insurance policies.
The usual avenue for making a claim following a business interruption event is via an Insurance Policy. The Business Interruption claim can only occur if it results from a claim for material (i.e. physical) damage. Physical damage may include closure or evacuation of a premises upon infectious or contagious disease manifested by any person whilst at the business premises. Where there is no material / physical damage and loss, a business interruption claim is not available.
Each insurance policy details the definitions of specific coverage inclusions and exclusions, applicable to the insured business. It is important to review individual policy details.
A common exclusion in business interruption policies is ‘any disease notifiable under the Quarantine Act’. The Coronoavirus has been listed under the Quarantine Act since the end of January 2020.
It is vital to understand the Policy. In the event a claim can be made, the insured business needs to ensure they:
- Document their loss and keep supporting records; and
- Take steps to mitigate the loss, including using due diligence and doing all things reasonably practicable to minimise any interruption of or interference with the business, to avoid or diminish the loss.
Coverage limits are detailed in the Policy schedule. These coverage amounts should be regularly reviewed, to ensure the business is adequately covered. Where a business in underinsured, the Insurer may reduce the amount they pay in the event of a claim. In the event a business owner makes a conscious decision to underinsure to save on insurance costs, it is important to understand the consequences and impacts on a claim.
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