The Australian Financial Complaints Authority (AFCA) has backed an insurer in a business interruption cover dispute over profit losses resulting from multiple COVID-19 lockdowns that required closures for extended periods.

The small business claim was declined by IAG as the policyholder hadn’t established the loss was caused by an insured event and the wording specifically excluded loss directly or indirectly caused by or arising out of a virus or other contagion.

The complainant argued the claim should be accepted because they hadn’t received a copy of the product disclosure statement (PDS) when the policy started and the schedule received was misleading.

Emails between the small business and the insurer were exchanged in October and November 2019, with cover coming into effect on October 31.

AFCA says it’s satisfied the insurer provided a copy of the PDS, a Supplementary Product Disclosure Statement (SPDS) and other information on October 25, and it was clear the documents needed to be considered as a whole and not in isolation of each other.

“There is no wording on the policy schedule to indicate cover is provided for all possible scenarios or that the policy schedule is not to be read in conjunction with the PDS,” the decision says. “The policy schedule specifically directs attention to the PDS as being relevant to the extent of insurance protection being provided.”

The small business did not dispute that there had been no physical damage or theft at the premises leading to interruptions and was seeking to cover profit loss caused solely by the multiple COVID-19 lockdowns.

“It is clear from the terms of the PDS that it is not enough for an insured such as the complainant to have suffered some form of business interruption leading to a loss of gross profit,” AFCA says.

“To be successful in establishing a valid claim, the complainant must show the claimed loss was caused by physical damage to or theft of property used at the business premises and which occurs during the period of insurance.”

The insurer is entitled to rely on the terms of the PDS to deny the claim, it says.

The decision is available here.