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Will Business Interruption Insurance apply to Covid-19?

Many businesses will have business interruption insurance whether that is because they chose to maintain the policy or for example, their lease requires them to maintain a policy.

All insurance policies differ in their terms and conditions. And whether the policy will respond to a particular event will be determined by the specific wording of the policy, the wording of the exclusions and importantly the individual businesses’ circumstances.

Most Business Interruption Insurance policies cover the insured against loss that results from interruption to their business due to damage at the business premises. Damage will be defined as loss, destruction or damage to the property of the insured caused by a defined event and a defined event will then be defined to include events such as fire, lightening, thunderbolts, earthquakes, riots, strikes, volcanoes, vandalism, malicious damage, storm or rainwater (to name a few).

The business interruption in these types of policies must result from physical damage to the property, not damage resulting from things such as a pandemic.

Additionally, policies will contain a number of specific exclusion clauses and one which is typical in business interruption policies is an exclusion of damage caused by certain infectious diseases that are notifiable under the Quarantine Act 1908 (Cth) as amended from time to time. Importantly, the Quarantine Act 1908 (Cth) was repealed and replaced (not amended) with the Biosecurity Act 2015 (Cth). This means that some policies may contain outdated wording making the application to Covid-19 questionable given it is a disease declared under the Biosecurity Act 2015 (Cth).

Each policies wording will determine its application to the damage caused by Covid-19.

It is worth businesses reviewing their policy to determine what exclusions or specific extensions apply, what legislation is referred to in those clauses and whether the policy will respond to a claim resulting from Covid-19.