Concern over pandemic insurance confusion

Customers who make an unsuccessful claim against an insurance policy must disclose that claim against any future insurance products.

Some insurance brokers are cautioning customers from making a claim because they take the view that those policies will not cover pandemics or that an unsuccessful response would be a black mark against their name. Picture: NCA NewsWire / Dylan Coker

As the pending test case between insurers and business interruption policy holders nears, some brokers fear unsuccessful applications risk damaging future coverage for businesses.

The situation is complicated as the impending court case looks set to be a battle over whether references to the repealed Quarantine Act should equate with the current Biosecurity Act.

It comes as some insurance brokers are cautioning customers from making a claim against their policies either because they take the view that those policies will not cover pandemics or that an unsuccessful response would be a black mark against their name.

Berrill & Watson Lawyers principal Josh Berrill, who is representing multiple business interruption insurance customers, said at least half of the clients had been told by their brokers “don’t bother” applying.

“They said business interruption just doesn’t cover pandemics so you won’t win a claim, but I haven’t had anyone saying don’t apply,” he said.

“In a majority of cases they’ve contacted brokers and they’ve been told pandemics aren’t covered”

Mr Berrill said some brokers had changed their tune after the AFCA test case was announced.

“A few of them have now said you can go ahead and make a claim now that it’s got quite a bit of publicity,” he said.

Customers who make an unsuccessful claim against an insurance policy must disclose that claim against any future insurance products, with some insurers looking unfavourably on denied claims.

Successful claims can also damage the capacity for a business to renew its policy, with industry sources suggesting in the event of a payout of business interruption insurance policies many would find it far more difficult to secure coverage.

But Mr Berrill said he understood why some customers were being told to consider the downsides of having their application rejected.

“It’s not necessarily bad advice to tell them if you make a claim and it’s rejected, this insurer or future insurers may not take you on,” he said.

National Insurance Brokers Association CEO Dallas Booth said it was advising its members to put in all business interruption insurance claims “if they believe the claim might be available”.

“It’s not the broker‘s role to determine whether a claim is payable or not,” he said.

“If the claim goes in and the insurance company says no then it’s a matter for the client to decide whether to take further.”

He said unsuccessful business interruption claims relating to coronavirus-caused disruptions were not an issue.

“To have a claim denied because it wasn’t covered by a policy because a claim was caused by a pandemic exclusion clause, I frankly don’t see that as a significant issue in terms of any future coverage,” he said.

“You can’t generalise it does depend on the facts of each case.”