Coronavirus and the effect on your insurance

The coronavirus (COVID-19) pandemic has had an immediate impact on many businesses and individuals. Whilst the federal and state governments introduce a number of welfare and economic stimulus packages, our office has been contacted by many of our customers asking us how different insurance policies may respond.

Below is a brief summary of some of the insurance policies and how they respond to coronavirus together with how our office is working on your behalf during these challenging times.

Our Office

Our Staff safety and accessibility

Like many businesses, we are following government directives, limiting our travel, face to face client and supplier contact.

Our staff safety and employment are paramount. Our staff have been provided with remote access and mobile communication and will continue to answer your queries, provide advice, service and lodge claims on your behalf.

Video conferencing with all our staff may be arranged via a number of platforms such as Zoom and Microsoft teams. All phone calls to the office will be diverted to staff mobiles otherwise please call them directly.

Our clients and industry response

Our clients are part of our extended family and we fully understand the coronavirus impact on our community. It is in everyone’s interest to ensure all our clients and community members remain in jobs and businesses.

We have written open letters to the insurance industry bodies requesting they provide an industry rescue package for all insurance customers.

We have personally spoken to insurers and premium funders urging they take positive action to ensure premium payments are suspended or delayed and premium increases are frozen.

The response from most insurers has been positive with many indicating some relief by way of premium payment extensions and some underwriting benefits to be advised in the following days.

Premium funders have provided some support with premium extensions of 30 days, but we believe they should do more to assist. 

Insurance Policies 

Business Insurance – Business Interruption

Some of our customers who may have taken Business interruption coverage have asked if this cover would extend to cover the effects of the coronavirus on their business, e.g. loss of trade due to being shut down by a government authority (e.g. nail salon industry).

Whilst Business interruption insurance policies generally cover losses incurred as a result of closure of an organisation’s business premises by public authorities due to the outbreak of infectious or contagious disease. Typically, all business interruption insurance policies exclude cover for any diseases that have been declared to be notifiable or ‘quarantinable’ diseases under relevant Commonwealth legislation.

COVID 19 (Coronavirus) is a listed human disease under section 42 of the Biosecurity Act 2015, the policy exclusion applies, and as a result, business interruption losses are not covered by insurance.

Business Insurance – Liability Insurance 

Public Liability policies cover the costs of legal action and compensation claims made against a business if a third party is injured or their property suffers damage whilst at the business premises.

The example raised by one of our customers who is a restauranteur was “assuming whilst providing takeaway food service the coronavirus was to accidentally spread unintentionally from their premise would that be excluded by their insurance?

The answer is” No”, each case is reviewed by insurers based on the information presented and within the confines of the policy, however, in general no such exclusion applies for corona or similar viruses under this section.

Domestic Landlord Insurance 

Provided you have taken “Rent Default cover” under your landlord insurance policy, most insurance policies will respond to a rent default claim. However, there are no specific rules in relation to coronavirus and as such policy conditions need to be met.  

Hence for rent default cover to apply, there must be a rental agreement in place. You or your agent must take reasonable legal steps available to You under the Residential Tenancies Act or other legislation to remedy non-payment and evict the tenant. In the current climate this is extremely tough as there are talk the government will introduce new laws prohibiting eviction for 6 months. 

We are urging insurers to review the eviction component of these policies in the current climate. 

We believe all insurers are likely to remove the “rent default” cover from all new policies from 30/3/2020.

Commercial Landlord Policies

The main insurer providing such cover is CGU insurance under their padlock product. A lease agreement must be in place and in writing.

There are some conditions such as the policy will not cover any arrears at the beginning of the policy period, or your tenant has carried business for less then 12 months at the property.

The policy will respond where the tenant stops paying rent owed, therefore, breaching the lease. You must take all reasonable steps legally available under the relevant state or territory legislation related to commercial leases to remedy non-payment of rent and evict the tenant.

The insurer will look at each case presented to it based on the facts provided.

No cover is provided for the first 4 weeks, 100% of rental income is paid for weeks 5-12 and 75% of rental income between weeks 13-26.

Marine Insurance

The effect of the coronavirus will be felt by many importers and exporters with cancellations of sales contracts or late delivery of goods.

Marine insurance policies provide insurance coverage for losses incurred during water transport operations.  

The standard coverage for most marine cargo policies is Institute Cargo Clauses (A).  Whilst such policies do not contain a specific epidemic exclusion, they generally require physical loss or damage to the goods, so in the absence of actual physical loss or damage the policy will not respond.

Cargo held up in the supply chain as a consequence of the coronavirus will still have full cover on goods for loss or damage.  

Management Liability policies

A number of areas may trigger claims but specifically: 

Claims may arise in the Employment Practices Liability section. The section which covers wrongful acts arising from the employment process such as wrongful termination, discrimination and sexual harassment.

Someone who may have had symptoms of the coronavirus may experience discrimination from colleagues and if not handled correctly may trigger them to lodge action against the policy holder.

Under the Directors and Officers liability section, cover may be provided for litigation say by shareholders alleging “a lack of preparedness for the potential effect of the coronavirus on corporate earnings or for claims that management personnel failed to take appropriate measures to protect third parties (including direct person-to-person transmission)”.

Travel Insurance

Whilst previous communications suggested most corporate travel policies provided coverage for Travel insurance and most leisure travel insurance (personal travel) did not. Coverage has moved based on government DFAT announcements, tour bookings cancelling and so forth. It is fair to say as of now, no policy in the market will provide coverage for new travel coronavirus claims as coronavirus in now a “known event” and insurers do not cover “known events”.

Important you talk to us about your property!

As businesses such as franchisees, restaurants, bars, gymnasiums, salons and a variety of retail stores close and remain vacant for weeks and possibly months, an unintended implication may arise under your property insurance policy.

Most insurers see unoccupied premises as having higher exposures such as vandalism and break-ins.

Insurers generally provide between 30 to 100 days for continued unoccupancy under insurance policies. Where a property is vacant beyond the insurers limit, the insurer must be notified in writing to assess their additional exposure. They may agree to continue insuring the property with no change, they may restrict some covers or provide higher deductibles and charge additional premiums.

Most insurers we have discussed this issue with have indicated they will have a sympathetic approach in the current climate but you must ensure you notify our office in writing and receive a confirmation to ensure the property remains covered in full.

Frequently Asked Questions 

Will my premiums increase in the coming months?

Insurers are still dealing with recent bushfire and storm claims across Australia. Most insurers will put out statements over the coming days as how they will respond to the coronavirus epidemic. Unlike banks, there is no security backing for insurers. Please constantly view our website for updates.

Will there be an increase in exposure to my business?

Most insurers are starting to put out communiques about how to better risk manage your property, this is an indication that they are likely to see a rise in vandalism, burglaries and similar claims. It is important you maintain a level of cover for these events and protect your business.

Assistance 

We all want to genuinely help, keep up to date by visiting our website www.steadfasteastern.com.au for latest updates or call your account executive should you have any questions.