Businesses
seeking to recover business interruption loss suffered as a result of the
global COVID-19 pandemic should carefully check the terms of their business
interruption (BI) insurance and seek
advice as to whether they should make a claim under their BI policy.
As
we discussed in an article published in Lawyers Weekly earlier this month, it is possible that businesses may
be covered for their loss under their BI insurance policy under an infectious
disease extension or under an extension for restriction to access to the
insured premises. That may be so even if the insurance policy contains a
"quarantinable disease" exclusion.
Watch out for the un-occupancy
exclusion – act now!
Aside from
common insurance policy obligations for insureds to promptly notify insurers of
any material change in the risk, it is also important to bear in mind that
Property and BI insurance policies often exclude loss or damage to premises
that have been unoccupied for more than a specified period of time; eg. between
30 and 90 consecutive days (un-occupancy
exclusion). The effect of this exclusion is that, if damage occurs after
the un-occupancy period expires, the insurer may seek to rely on the exclusion
to deny cover, even if the damage has no connection to the fact that the
premises were unoccupied.
The scope of
the un-occupancy exclusion varies from policy to policy (including what
"unoccupied" means for the purposes of the exclusion) and arguments may
be open to the insured that the insurer is only able to rely upon the exclusion
if the fact that the premises were unoccupied caused or contributed to the
damage to the premises, but it is best to be proactive and manage this issue
with your insurer to avoid a dispute down the track.
If a business
has been forced to close as a result of COVID-19 it will be important that they
take into account the un-occupancy exclusion and proactively engage with their
insurance broker and insurer to obtain written confirmation that the un-occupancy
exclusion will not apply if they are unable to return to normal occupation and
operations within the un-occupancy period specified in the exclusion.
It is likely
that, if you proactively engage with your insurer and inform the insurer of
your circumstances, the insurer will agree not to rely upon the un-occupancy
exclusion given the impact COVID-19 has had on Australian businesses. In doing
so, insurers may seek to impose certain conditions such as requiring that the
insured business:
- maintains security and substantially
the same contents and fittings that would be required for the ordinary
operation of the business;
- ensures that the premises remains
connected to utilities; and
- agrees that the business will re-open
the premises when the COVID-19 restrictions have been lifted.
It is clearly
important that insurers exercise flexibility regarding the un-occupancy
exclusion given the unusual circumstances created by COVID-19.
That said,
businesses should proactively engage with their insurer to avoid the
application of the un-occupancy exclusion.