Business Insurance and Cover relating to COVID-19

As the global pandemic of COVID-19 continues to evolve, Australian businesses must adapt and take steps to ensure their commercial, legal, and financial interests are adequately covered moving forwards. Given the current uncertain economy, it is likely that many businesses will seek to rely on their business insurance policies in the near future.

For business interruption insurance policies (also known as business income insurance) to apply, there is generally a requirement that there has been a direct loss or damage to property after a catastrophic event, meaning many businesses may not be protected by their insurance policies if they were to suffer loss in sales or be forced to close due to issues arising from COVID-19. The general purpose of business interruption insurance is to allow for continuous income for businesses, however the circumstances in which a policy may apply is dependent on the exact wording of the terms and conditions (including any add-ons) applicable to a Business.

Review of business insurance policies

In this challenging time Businesses ought carefully review the terms and conditions of their insurance policies to assess the potential inclusions and exclusions, and whether their respective policies as outlined below cover viral pandemic situations such as the Corona Virus. A given situation may evoke cover under one of the above policies, a combination of policies, or may not be appropriately covered by any policy at all.

The impact of COVID-19 is evolving daily. It is of particular importance that businesses review any updates, announcements or notices made by their insurer, particularly in relation to the date COVID-19 was declared a pandemic, and the date which any policies were taken out. The risk to businesses whose insurance is inadequate may be detrimental to a business’ survival.

Our team of commercial lawyers at LGM Advisors have identified several aspects of insurance policies that may be relevant at this time, which ought be explored by prudent businesses checking their insurance policies:
Directors’ and Officers’ Liability Policies may be applicable in situations where a Director acts wrongfully in response to the pandemic, such as planning and reacting to the pandemic, and ensuring shareholders are adequately informed.

Commercial General Liability Policies may be applicable in cases where a third party suffers a personal injury, such as where the Business has failed to exercise reasonable care in relation to the third party’s exposure to or risk of contracting COVID-19. The extent of cover enlivened by a policy will depend on the scope of the situations covered as defined by the wording, and the decision of the third party to make a claim against the Business. Organisations are urged to consider developing appropriate and comprehensive pandemic plans and policies to mitigate risk of claims being made against them.

Professional Liability Policies may be applicable should a third party be injured, be exposed to, or contract COVID-19 due to the Business providing their professional services to the third party. For example, if a third party alleges that the Business has acted negligently in failing to minimise the individual’s risk to COVID-19 or further adverse effects.

Workers Compensation is applicable where a worker becomes sick or injured in the workplace. For example, workers compensation and health and safety concerns may be raised where an employee of the Business develops COVID-19 in the workplace or claims that the work environment is unsafe due to the risk of employees developing the virus. Employers should be aware of their duties under the relevant Occupational Health and Safety and Workers’ Compensation legislation, including the duty to provide a safe and risk-free work environment, and ensuring appropriate arrangements, training, and supervision are provided for employees. Penalties may apply if these duties are not complied with. Further complications may arise in situations where a Business directs a worker to work from home and the worker is subsequently injured.

The above has been provided for your information and is not to be relied upon as legal advice.

LGM Advisors is a leading commercial litigation Melbourne professional law firm, the experts to contact when you require  commercial lawyers and employment lawyers. LGM Advisors have the skills, experience and expertise to ensure that you and your dispute is consulted upon with the utmost professionalism. Contact LGM Advisors today on (03) 9832 0608 or by email at marketing@lgmadvisors.com.au.

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