The Australian Financial Complaints Authority (AFCA) has ruled against a confectionary seller in a dispute over cover for losses when two shops in tourist locations were forced to close due to the coronavirus outbreak.

One of the shops was ordered to shut for about six weeks to minimise the spread of the virus, affecting products with a short lifespan and leading to a significant volume of stock being thrown out.

The other shop in a retail centre closed when reductions in foot traffic and discretionary spending made it unrealistic to open until travel restrictions started lifting.

The woman said she had been a loyal customer with IAG’s Insurance Australia Ltd for many years and was covered for stock loss. The policy didn’t mention a lack of cover for pandemics and the only exclusion was terrorism.

But AFCA says the insurance is a “defined events” policy which lists specific circumstances for cover including fire, lightning, explosion, earthquake, riots, strikes and civil commotion, escape of liquids, impact by vehicles, animals or trees, vandalism or malicious damage and storm or rainwater damage.

The policy schedule confirmed the retailer had not elected business interruption cover for the two shops.

The decision notes the stock was spoiled and not physically damaged, and there was no evidence the cause of the stock loss was from any of the defined events.

“The impact of the coronavirus pandemic, or any outbreak of a disease or virus, on the business and its stock is not an event which is covered by the policy,” the adjudication says. “The result is that the insurer is entitled to decline the claim.”

AFCA also reviewed telephone recordings and notes after the complainant raised concerns about the handling of the claim, saying some staff were hostile and unfriendly and she felt she was not going to be covered for coronavirus from the beginning.

“Based on the available material, I am satisfied that the handling of the claim was appropriate,” the adjudication says. “Therefore, an award of compensation is not warranted in the circumstances.”

The decision is available here.