Victorian government insurer sets tough test for business interruption

The Victorian government insurer has one of the toughest tests in the country for clients to make business interruption insurance claims.

Model Joy wearing a dress from Arnsdorf, ahead of Runway 4 showing at the State Library of Victoria as part of the Melbourne Fashion Festival in March 2021. Picture: Ian Currie

The Victorian government insurer has only paid $15,000 for business interruption claims caused by COVID-19, thanks to a tougher test than many in the private sector.

That’s despite the master policy wording of the Victorian Managed Insurance Agency (VMIA) noting that it covers “financial loss resulting from interruption or interference with the insured’s business directly arising from the intervention of a public body authorised to deny and restrict access to the insured premises, directly arising from an occurrence or outbreak at the insured premises of the following: a notifiable disease”.

Industry figures say the requirement for an outbreak to be at a premises, coupled with a government order to shut down, is a far harsher threshold than others in the private sector.

It comes as the NSW’s Treasury Managed Fund has paid $71m in business interruption claims to NSW state agencies since the start of the pandemic.

The fund has budgeted $343m to cover claims arising from the pandemic in NSW.

The private insurance industry has launched its last bid in the High Court to stop up to $10bn in business interruption policies referencing the defunct quarantine act.

But the gulf between insurance payouts in NSW and Victoria may hold implications for the future of several key institutions that have spent months with their doors shut.

More than 18,000 COVID-19 infections blighted Victoria in the long months of lockdown after the virus escaped the state’s ill-fated hotel quarantine scheme.

Thousands of Victorian businesses were force to close by government order to prevent the spread of COVID-19 for months.

Many of these include the more than 5000 supported entities insured by VMIA, which repeatedly refused to disclose who it insures citing commercial confidentiality.

However, the insurer notes it covers more than $201bn in state assets, including roads and rail systems, hospitals, schools, cemeteries, cultural institutions and national parks.

“VMIA has advised its clients on their insurance position relating to the cancellation of major events and business interruption throughout 2020, and will continue to provide advice on current and emerging risks to support clients and the broader Victorian community,” a VMIA spokeswoman said.

Josh Mennen, principal lawyer in Maurice Blackburn’s insurance practice, said it would prove difficult for many to meet VMIA’s criteria, but called for more transparency.

“It would be concerning if our government insurance agency wasn’t open and transparent with the public about the treatment of claims made,” he said.

The State Library of Victoria said it had received no payouts from VMIA.

“The majority of the Library’s events are free so there was no significant impact,” a spokeswoman said.

However, the State Library hires out several of its halls for banquets, cocktail functions or as theatres, which have all been banned for months.

Parks Victoria declined to say if it had tried to make a claim, but noted its expected event booking fees is expected to be $500,000 lower than the previous year, mainly as a result of coronavirus-related restrictions.

VMIA has paid more than $1.87m for 120 claims for internal and domestic travel cancelled as a result of COVID-19.