The coronavirus outbreak has, understandably, sent many companies spinning as they struggle to pay wages and meet their obligations with overheads and other expenses. This has led many to turn to business interruption insurance policies as a solution – only to find out that, in many cases, they are not covered in select circumstances such as this pandemic.
However, Clayton Utz partner Mark Waller believes that they may have hope after all – suggesting that cover might apply even when the policy contains a “quarantinable disease” exclusion.
He points out that he has been advising some clients on policies containing exclusions related to “quarantinable diseases under the Quarantine Act 1908 and subsequent amendments” - in his view, this does not include COVID-19.
Highlighting that business interruption usually covers the cost of reinstating or repairing damaged property, he notes that policies can also contain extensions for losses caused by human infectious disease – usually when there is an outbreak within a specified radius or where a public authority has ordered the premises to be closed or evacuated.
“Where the policies simply require that the outbreak occur within a specified radius of the premises, the insurance policy should respond, as it is likely that the business will be able to establish that the outbreak is present within that area,” he said.
Special counsel Chris Erfurt also believes that some businesses are being led to believe that policies will not cover COVID-19 due to the “quarantinable disease” exclusion.
“Our view is that it is not correct to interpret the exclusion as applying to COVID-19,” said Erfurt. “For one thing, the Quarantine Act was repealed nearly five years ago, so it does not apply to COVID-19. While some of the subject matter the repealed Act covered is now contained in the Biosecurity Act 2015 (Cth), that Act is not a ‘subsequent amendment’ to the Quarantine Act. In any event, a listed human disease under that Act - which does include COVID-19 - does not fit within the description ‘quarantinable disease’ under the exclusion, as that is a distinct concept under the repealed legislation.”
“Manybusinesses are suffering major losses, particularly where they have been designated non-essential businesses and have been forced to close,” added Waller. “If there is any scope for these businesses to recoup some of those losses through their BI insurance, they should be able to do that.”