The recent bushfires and Business Interruption coverage

Many SMEs have Business Interruption (BI) Insurance that covers loss of income due to an inability to trade, usually due to a disaster. Whilst the COVID-19 pandemic is on all of our minds today, we can’t forget about the businesses that are still trying to recover from the bushfires.

Questions have arisen about whether BI policies cover SMEs for the lost trade due to the recent bushfires, such as a lack of tourism in affected areas, warnings of impending bushfires or lack of access. Where SMEs were unable to trade due to factors outside their control and still are unable to trade because their buildings haven’t been rebuilt, will SMEs be able to make successful claims against their BI Insurance?

It’s fair to say that brokers/advisers have already voiced concerns over whether BI policies will provide the cover that bush fire affected SMEs need to weather this latest disaster. Whilst brokers/advisers are doing everything they can to push these claims forward, they are also calling for a review of BI policies, relating to disasters.

Uncertainty over Business Interruption Insurance payouts

Whether a company will be able to make a successful claim against their BI insurance for losses due to the bushfires depends on the inclusions and exclusions of their policy. More specifically, it depends on the actual wording and the legal interpretation of these words.

With the massive bush fires causing businesses to cease trading, due to circumstances beyond their control, SMEs are finding that the wording of their policies is key to a successful claim. Whilst some businesses were burnt to the ground, others lost trade due to a lack of tourism or smoke damaged stock. Yet others who usually relied on trading over the Christmas period to last them through the rest of the year, had no revenue at all. A BI Insurance policy will provide some cover, but will it be enough?

There is some suggestion from brokers/advisers that an industry review should include clauses relating to the reduced attraction in a tourist spot, due to bushfires and smoke. This is a reasonable request, when you consider that many bushfire affected businesses depend on tourism for their income.

These are the types of questions that will need to be resolved, sooner rather than later, and will hopefully be addressed by an industry review of BI Insurance, shedding light on these issues, for the benefit of all concerned.

Positive moves for future Business Interruption Insurance policies

The Federal government has already put in place a number of financial assistance packages for businesses that suffered through the bushfires. So how can the Insurance Industry revise their BI Insurance policies to help SMEs in the future?

Brokers/advisers are still processing BI claims from the recent bush fires that affected businesses across many areas that depend on tourism to make a living. Insurance providers are responding quickly to these claims and going out of their way to help SMEs.

However, it may be difficult to interpret BI claims against the backdrop of extreme events, such as the massive bushfires earlier this year. One obvious strategy is that the wording of these policies needs to be clarified, so that both insurance providers and SMEs know exactly what a policy covers, precluding any disputes. Consistency between policies and how to best include extreme events are two other areas that are worthwhile reviewing.

To discuss details of your coverage or get help making a claim, contact Lewis Insurance Services on 07 3217 9015 or send us an email by clicking here.

This article was published by our AFSL Licensee, Insurance Advisernet Australia P/L, www.insuranceadviser.net

Disclaimer:
This information and any accompanying material does not consider your personal circumstances as it is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances and considering the Product Disclosure Statement.