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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

Potential for second BI test case flagged

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IAG has flagged the potential for a second industry business interruption test case to clarify that prevention of access extensions don’t apply in the case of pandemics.

CEO Peter Harmer says the extensions provide cover when a business is forced to close due to a civil authority direction after property damage in the vicinity, with some policies also referencing threats to life.

“There is in the minds of some a bit of confusion as to whether or not cover is afforded under that extension,” CEO Peter Harmer told a media briefing today.

“Our view in relation to our policies, and I understand this is the position of the industry, is that the pandemic exclusion applies broadly across the entire cover and is not able to be selected as to which part of the cover that it applies to.”

An IAG spokesman said the prevention or restriction of access cover is included in some of the firms’ business interruption policies, but it is clear the intent is not to address pandemic risks.

“It’s designed to cover businesses for loss when an external event causes property damage and this damage leads to an authority making an order either preventing or restricting access to the premises, if access poses a risk to either persons or the property,” he told insuranceNEWS.com.au.

“We’re working with the industry on whether this is an issue that will also require clarification through the courts, but this hasn’t progressed to a further test case at this stage.”

The Insurance Council of Australia (ICA) and the Australian Financial Complaints Authority (AFCA) have already agreed to file a business interruption test case focusing on wording issues related to legislation referred to in policies.

Many Australian insurers’ policies still include exclusions referring to the now repealed Quarantine Act 1908, which was replaced by the Biosecurity Act 2015. As a result, some claimants hope the exclusions will not apply to COVID-19 claims.

Mr Harmer says the industry is confident in its view that it doesn’t matter which Act was referenced.

“Any loss or damage as a result of pandemic is not covered,” he said. “But we don’t want any lingering doubts so we are looking for a Supreme Court hearing in NSW to hear a test case and bring clarity for everybody.”

He says IAG has received a small number of claims from people “who haven’t understood the exclusion in their policies”. Those claims had been denied.