What happens when you take every precaution only to be let down by your insurer? That’s what Josephine Woodberry is asking. She purchased a business interruption insurance policy for her dance studio in Preston, near Melbourne, only to discover she wasn’t actually covered.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
What happens when you take every precaution only to be let down by your insurer? That’s what Josephine Woodberry is asking. She purchased a business interruption insurance policy for her dance studio in Preston, near Melbourne, only to discover she wasn’t actually covered.
Sydney Morning Herald details that after 20 years in business, Woodberry filed a claim with her insurer after COVID caused a seven-month shutdown of the school. That’s when she was informed that her policy would not cover a global pandemic.
Woodberry is not alone. She’s one of the thousands of small businesses gasping for air during COVID, now being denied the coverage they’ve been paying for. Brokers appear to be firmly on the side of insurers over clients.
Unlike Britain, where regulators used a test case to evaluate industry-standard policies—Australian courts let the industry self-regulate. Regulators coordinated with the insurance industry to test whether the Quarantine Act includes infectious diseases as declared under 2015’s Biosecurity Act. After a surprising appeals loss, the insurance industry stands to lose $2 billion.
Still, the test cases keep coming. Next up, QBE and IAG policies will be under the legal microscope. Clearly, there won’t be a consensus on policy coverage any time soon. This is terrible news for the thousands of businesses that are barely staying afloat.
One Berril Watson attorney explains that even if the courts rule that insurers have to cover COVID losses, claimants will still need to show actual covered losses. He goes on to state that insurers shouldn’t be delaying when policyholders need them most—they should be paying claims.
Some insurers claim that business interruption policies were never intended or priced to cover a global event like COVID. They warn that the cost and availability of insurance for small businesses will dramatically change should the current legal judgments prevail.
Meanwhile, Woodberry and thousands more like her are adamant. Woodberry refuses to let insurers win when she’s completely convinced that her policy covers her studio.
