Opal retail and wholesale business Cody Opal Australia has publicly challenged insurers for refusing to pay out small businesses' business interruption (BI) claims.
The National Opal Collection (NOP), Cody Opal Australia's retail arm, had taken out a BI policy underwritten by AXA and Lloyds before the COVID-19 pandemic. The policy included coverage in the event of an “outbreak of a notifiable human infectious or contagious disease occurring within a 20-kilometre radius of the [premises].”
However, the company's insurer rejected a claim against the BI policy in May, insisting that the business losses (which the Opal dealer estimates to be over $3 million) would need to have occurred as a consequence of COVID-19 cases within 20 kilometres of the premises rather than “overarching factors resulting from the COVID-19 pandemic as a whole,” including international border closures and local lockdowns that limited retail foot traffic.
Cody Opal Australia director Damien Cody said the insurer's interpretation was “self-serving and convoluted” as the BI component of the company's insurance policy had no ambiguity and relevant exclusion, according to a Jeweller Magazine report.
Melbourne law firm Berrill & Watson, which represents Cody and manages over 20 other separate BI claims, said many exclusion clauses define a pandemic as an “outbreak of a ‘quarantinable disease’ under the Quarantine Act 1908.”
“Under this Act, the government had the power to put certain things into place, such as close borders, restrict access [to premises], and shut businesses down,” said Berrill & Watson director John Berrill, as reported by Jeweller Magazine.
However, Berrill pointed out that the government replaced the Quarantine Act with the Biosecurity Act in 2016.
“So, a ‘quarantinable disease under the Quarantine Act’ is no longer how you would describe a pandemic declared by the government – instead it would be a ‘human infectious disease under the Biosecurity Act’,” he continued.
“The problem for many of the insurance companies is that they did not update the wording in the policies, so a lot of exclusion clauses still refer to ‘a quarantinable disease under the Quarantine Act’.”