Is your business at risk due to insurance payout delays?

Businesses with business interruption insurance policy cover have been provided some long-awaited clarity about their ability to claim for the unprecedented losses sustained due to the COVID-19 pandemic.

While the Insurance Council of Australia (ICA) has encouraged the 330,000 eligible businesses to lodge their business interruption insurance cover claims, insurer delays in granting cover has left a number of policy holders on the brink of collapse.

As we await the ruling of a second test case in the Federal Court, the ICA has warned policy holders that the “vast majority” of claims will not be finalised until there is further clarification over specific policy wordings. This delay leaves a number of small businesses vulnerable, as many government support has ended or is about to end.

Insurers who unreasonably delay making payouts could face an astronomical $10 billion worth of liability and be subject to class actions.

Whilst the insurance industry is also set to face inevitable backlash for the hold up of insurance payouts, it raises questions as to why definitive answers for policy holders have taken so long in Australia.

Compared to the business interruption test case conducted in the UK last year, Australian efforts have arguable been too narrow and slow to resolve relevant issues.

The handling of the matter by the sector is causing frustrating delays for policy holders.

Eligible businesses may be able to fast track wanted clarification and certainty surrounding their cover by asking insurers to admit their claim under Section 41 of the Insurance Contracts Act 1984 (Cth) (The Act).

Section 41 of the Act

Pursuant to Section 41 of the Act –

“If the insured or any third-party beneficiary (the claimant) under the contract has made a claim under the contract, the claimant may at any time, by notice in writing is given to the insurer, require the insurer to inform the claimant in writing”:

  • whether the insurer admits that the contract applies to the claim; and
  • if the insurer so admits-whether the insurer proposes to conduct, on behalf of the claimant, the negotiations and any legal proceedings in respect of the claim made against the claimant.

The insurer may not refuse payment of the claim or reduce the amount payable if the insurer does not within a reasonable time after being given notice, inform the claimant that the insurer admits that the contract of liability insurance applies to the claim.

With policy holder’s success in the first Australian test case (read more here), Section 41 can assist businesses to obtain clarification from insurers in relation to their insurance cover.

Policy holders are encouraged to begin to gather necessary evidence and seek assistance in the lodgement of a business interruption claim.

Elit Lawyers by McGirr & Snell is one of the only law firms with more than 60 years’ experience acting for major Australian and international insurers that can also act against insurance companies on behalf of business and individual policy holders.

To have your policy reviewed by our team, contact Danielle Snell and Robert McGirr.

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We recently instructed Danielle from Elit Lawyers by McGirr & Snell to help with a legal dispute. As a small purpose led business, this was a “David v Goliath” fight as our dispute was with a large global corporation. This dispute was during a very emotional time as we were in the middle of a global pandemic, Melbourne’s sixth lockdown, homeschooling and no childcare – all while trying to keep our small business alive.

The attention, compassion and guidance that Danielle and the team showed us was absolutely incredible. I have 10 years legal experience myself and even with that, I was reluctant to litigate, especially during such a difficult time. However Danielle always gave us confidence in knowing that she was in our corner and always working for our best interests, so my reluctance was quickly appeased.

Today I am pleased to share that David defeated Goliath and we could not be more thrilled with the result we received thanks to Danielle and the team from Elit Lawyers. Danielle not only saved our company, but ensured that we could continue doing the good work we were previously and helping improve the lives and mental health of mothers across Australia.

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Danielle Snell is a very intelligent and impressive lawyer whom I have worked with in my role as senior counsel on various litigation matters.  She is a well-known and respected lawyer who knows how to handle difficult and intensive litigation.  Danielle combines a deep knowledge of the law across many practice areas with a practical approach to litigation, and is authentic and charismatic in her dealings with others.

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