The financial dispute resolution body has ruled mostly in favour of Suncorp after a complaint was lodged by a Victorian holiday accommodation owner who believed he should have received a higher business interruption (BI) claim payout following bushfires in the area.

The complainant held a policy that covers loss of income due to prevention of access to the insured business.

Suncorp paid the complainant $48,133, excluding GST, for loss of income from December 31 2019 to February 4 last year, the period when major roads leading to his property in East Gippsland were closed because of damage caused by bushfires.

The insurer says the policy does not cover for any loss of income after February 4 since the main roads were reopened on this date but it nevertheless decided to make a further payment of $10,388, minus GST, to cover the period of February 4-26.

The complainant, who lodged his claim for “resulting loss of income” on January 17 last year, does not dispute that the property was accessible from February 4 onwards. While his site was not damaged by the fires, he says his business took a hit from the evacuation notice and road closures.

He says since his policy covers for loss of income for 24 months, the insurer should assess the compensation he was entitled to after February 26. He made his case based on the fact that the policy terms do not specify that cover for loss of income ends when access to the premises is restored.

The Australian Financial Complaints Authority (AFCA) ruled Suncorp did not assess the claim correctly. It says the policy covers “loss of income caused by prevention of access” and “does not require that the loss of income occur during the prevention of access”.

However Suncorp is not required to take any further action in relation to the claim unless the complainant is able to prove that it was prevention of access after February 26 that was responsible for the loss of income in the subsequent weeks.

“The insurer is liable for loss of income that occurred after February 26 2020, if it was caused by prevention of access to the premises,” AFCA said. “However, the available evidence indicates that any loss of income that occurred after February 26 2020 was caused by changes in market conditions, not prevention of access.

“If the complainant provides evidence showing it lost income after February 26 2020 due to prevention of access, and not due to changes in market conditions, the insurer should reassess the claim.”

Details provided in the ruling showed Suncorp had hired a forensic accountant to assess the complainant’s loss of income. The accountant was asked to investigate whether road closures after February 4 had any effect on the claim and the answer was most likely not.

The accountant said the main roads leading to the complainant’s premises were open from February 4 last year, but potential customers may have been affected by smaller road closures. It says any loss of income after this was probably due to bushfire damage across wide areas of Victoria and NSW, rather than any prevention of access to the complainant’s premises. The complainant has not provided any information to refute this.

AFCA says the complainant may have lost income because the bushfires caused a decrease in tourism in the Gippsland region but points out the policy does not cover for such losses.

Click here for the ruling.