The Insurance Council of Australia says the business interruption (BI) test case being considered by the Australian Financial Complaints Authority (AFCA) may provide clarity on claims relating to the coronavirus shutdown.
AFCA says a test case proceeding heard by a court could provide an “authoritative decision” on how policies should respond.
Issues to be examined could include whether the impact of COVID-19 can be interpreted as damage, the definition of an outbreak, and whether or not exclusions referring to outdated legislation hold up.
As insuranceNEWS.com.au has reported, some law firms are arguing that insurer exclusions that cite the now repealed Quarantine Act would not hold up. Insurers, however, say the intention of the exclusions is clear regardless of which act is referred to.
“Business interruption cover is usually triggered when the insured property is directly affected by physical damage, though each insurer’s policy is different,” Insurance Council spokesman Campbell Fuller said.
“Most current business interruption policies contain exclusions where the intention is to rule out losses caused by notifiable, quarantinable or infectious diseases.
“We are aware of debate about some insurers relying on certain laws as the basis of the denial of claims.
“Where insurers’ decisions on claims are in dispute, measures that provide greater clarity and certainty to insurers and consumers may be necessary.
“A test case may assist, and ICA is discussing this with members.”
Meanwhile, Steadfast and AUB Group say some BI policies will respond to coronavirus-related shutdowns, despite insurers’ intentions to rely on pandemic exclusions.
AUB Group CEO and MD Mike Emmett says brokers act on behalf of their clients and will work with insurers to get claims paid.
He says many BI claims will need to be tested in court but in his view “the intent of both parties at the time of entering into the contract” will be crucial.
Mr Emmett says the outcome of court proceedings will also depend on specific policy wordings but predicts “there will be insurance payouts as a result of the Government shutdown”.
Steadfast MD and CEO Robert Kelly told insuranceNEWS.com.au it is “not a broker’s position” to tell a client that a claim won’t be paid. Instead, brokers will work with clients to detail how a loss occurred and put that to the insurer.
“It is the insurer that adjudicates on it,” he said.
Mr Kelly believes an AFCA test case “makes sense” but adds that each circumstance is different and there are wide variations in policy terms.
Like Mr Emmett, he believes that some policies will pay out and that the issue isn’t as clear-cut as it might have first appeared.
Blog Submission: Peter Sellwood
PALTD InsureRight – Insurance & Risk Management
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