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Coronavirus (COVID 19) and Business Interruption Insurance

Business Insurance Small Business Insurance Business Interruption Insurance

Australian Businesses have been disrupted by the Coronavirus (COVID-19) in many ways, such as travel, import and or export restrictions.

The purpose of this paper is to explain and warn that general insurance is unlikely to provide the protection that it does for traditional risks such as fire, burglary or storm. This paper looks at business interruption insurance, a similar one about travel insurance is available.

Business Interruption

Traditionally, business interruption policies only cover disruption to a business as a result of damage to ‘insured property’. However, over time, insurers widened the protection to provide coverage as a result of a closure of the business by a public authority for a number of risks, including infectious disease. This was designed to cover things such as an outbreak of Legionnaires disease, or measles; which can close down one or two buildings disrupting a small number of businesses. Notwithstanding this, some policies provide coverage for an outbreak up to 50 kilometres from the business location, but most only cover at or near the premises insured.

While there may be exceptions, where a specialist business has secured very specialist global insurance, the cover afforded by both business packs and standard Industry Special Risks policies, are not intended to cover disruption caused by an outbreak in a different state, let alone a different country.

The outbreak of the SARS (Severe Acute Respiratory Syndrome) in 2013, prompted insurers and reinsurers to do modelling as to just how large claims could amount to in the event of a major pandemic such as the Spanish Flu, which lasted from January 1918 – December 1920, and resulted in the death of anywhere between 40 and 100 million people. The reality is that the global funds held by insurers could not meet business interruption claims arising from such a large-scale pandemic. We would have no insurance industry to protect against the traditional insured perils.

Not wishing to strip away the coverage that was being offered for localised infectious disease outbreaks insurers –prompted by reinsurers– added an exclusion to their policies, stating that disruption from a number of highly effective diseases were not covered. As such, diseases can arise at any time and originate from new sources, the insurance industry introduced a clause which excludes any disease that is notifiable under the Quarantine Act 1908 (Cth), which has been updated by many insurers in line with changes in legislation to the Biosecurity Act 2015 (Cth).

As of the end of January 2020, Coronavirus is a listed disease and so all, but a few, policies exclusions will take effect. This means that regrettably there is no insurance protection for disruptions to business arising from Coronavirus.

As with any other threat, it is important to consider what risk management measures you can introduce to mitigate the risk to your staff, customers and business.

Management Liability Insurance

Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.

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Business Insurance

A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.

Details Get Quote

Business Package

Purchase up to six products under one Business Insurance Package.

Details Get a quote!

Risk Management Tips

How to avoid infection:

Here is a short list of ways to minimise the spread of Coronavirus

Practice good personal hygiene
Avoid contact with anyone with or suspected of having Coronavirus
Boost your immune system by eating well, exercising, having enough sleep, and keeping your stress levels under control
Cancel or delay any travel to affected areas until the crisis is over

Recommended Actions for your organisation:

Implement a home quarantine regime for anyone that has travelled to an infected country or is likely to have been in contact with someone infected with Coronavirus
Implement a home quarantine regime for anyone that has travelled to an infected country or is likely to have been in contact with someone infected with Coronavirus
Review and update, if necessary, human resources (‘HR’) policies on fitness for work, including possible quarantining of employees and formalising the requirement for employees to remain off work if affected
Consider or extend flexible working arrangements to reduce the likelihood of the spread of the virus in the workplace or the community
Update travel rules and arrangements limiting non-essential business travel
If not already in place, provide sanitized hand washing stations for use by staff and visitors
Review arrangements for workplace hygiene and cleaning protocols including “cough and sneeze” etiquette
Protect the mental wellbeing of employees concerned about the Coronavirus
Ensure clear and honest communication to employees on their welfare

Keep Informed:

Everyone should remain alert for updates and advice from the relevant authorities on additional steps to manage the spread of the disease.

The health department in each state is providing excellent resources, advice and regular updates.

Before travelling, check for and take the advice of any travel warnings on www.smartraveller.gov.au

Business Continuity Management Planning:

A pandemic is just one risk facing modern organisations. Having a fully documented and exercised business continuity management plan is important for every business. Visit www.continuitycoach.com to learn more.

covid-19 Corona virus

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

Adroit Insurance & Risk, ABN 75 078972 700, AFSL 244 348

This article originally appeared on Adroit Insurance & Risk Blog and has been published here with permission.