COVID-19 and insurance: implications for businesses

As COVID-19 (Coronavirus) continues to escalate around the world, so do the implications for business. Here are the latest developments from an insurance perspective.

Business travel insurance policy holders

Business Travel Insurers have advised that COVID-19 is a now worldwide foreseeable event.  This means with effect from on or around 1 March 2020 (depending on your specific insurers cut off date), no cover will exist for new policies and/or new paid travel arrangements made after this date.

This is in addition to the previous advice concerning mainland China. This region was declared a foreseeable event with effect from on or around 22 January 2020 (depending on your specific insurers cut off date).

If you do suffer a cancellation or disruption loss, you should first contact your travel agent or airline to seek a refund.  In the event you are out of pocket we recommend you submit a claim that can be assessed by your travel insurer.

If you are considering any travel we strongly recommend you refer to DFAT’s Smart Traveller website.

Business interruption insurance policy holders

Business Interruption Insurance policies will not respond to COVID-19.

On the 31st January, COVID-19 became a listed human disease under the Biosecurity Act. The result of this is very significant from an insurance perspective.  The majority of insurance policies contain an exclusion for claims which arise from a listed human disease under the Biosecurity Act.  The exclusion will void cover in respect of a business interruption loss resulting from any disease listed under the Act.

This exclusion was introduced following the SARS outbreak.  This event prompted insurers to model the financial exposure as a result of a global pandemic such as the Spanish Flu. The result was that insurers would not have the funds to meet the potential claims from such an outbreak.

The reality is that the majority of businesses are uninsured for business interruption due to COVI-19.  All businesses should now implement risk management procedures to address this exposure as an uninsured event.

Marine cargo insurance policy holders

As the impact of COVID-19 continues to spread, many clients are asking how their Marine Cargo Insurance will respond to claims arising.

Marine policies are designed to cover physical loss or damage to goods whilst in transit.  The basis of cover will usually extend to any variation in voyage, including delay, where the variation is beyond the control of the insured.  Any cover provided in respect of delay is limited to the loss or damage to goods.

Marine insurance does not usually extend to cover consequential loss or delay costs.  A key concern of many clients is around the delay of vessels and any associated demurrage costs which may be incurred for a delay in port due to COVID-19 restrictions.  Most policies will NOT respond to these costs however there may be some cover depending on the circumstances.  Generally these costs will only be covered if they are incurred to minimise the loss or damage to insured goods.

Event cancellation insurance

Many businesses have been impacted by the cancellation of events and conferences around Australia.  Those businesses who are responsible for organising events are particularly exposed by the current situation.

Standard event cancellation policies exclude cancellation that arise from pandemic.  It is possible to have an event cancellation policies extended to include cover for communicable diseases however this is not common due to the additional premium required to take this form of coverage.

Need some help or got questions? Contact your local Bentleys advisor now.

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

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