Have you got it covered?

A tragic realisation

Gary owned and operated a small business. Gary had a general business insurance policy to cover any issues with his business and it included business interruption. Tragically, Gary was killed at the business premises in November 2014 by a disgruntled customer.

Gary’s widow, Gina, could not continue the day-to-day operations of the business and, not being able to find a buyer, Gina wound up the business in February 2015.

Gina filed a claim with the business’ insurer for an ongoing and permanent ‘business interruption’. Gina said the policy included a reference to interruptions due to the business having to be closed by a death at the business premises.

 

The complaint

The insurer reviewed the claim and proposed to pay 3 days’ business interruption because the business was closed for 3 days by the police so they could complete the scene investigation. Gina disagreed with the insurer and felt that the business had been permanently interrupted by her husband’s death and that the insurer should pay out the total sum insured of $20,000 under the business policy.

Gina contacted FSCL.

 

Outcome

We reviewed the policies that Gary had put in place for the business. The terms in the policy were clear that cover only applied where the business could not be operated due to the actions of law enforcement or a local authority requiring the premises to be closed following a murder or suicide at the premises.

The purpose of a business interruption policy is to enable a business to be compensated for a compulsory closure where the business would otherwise be continuing to trade. Gina was arguing that the business interruption policy should respond as a life insurance policy would. We considered this interpretation of the policy was not possible under the intention and wording of the insuring clause.

We found that the policy could only respond where the business premises could not open for trading due to it being closed by the police. Gina accepted this and the Insurer paid for a period of 3 days and in a goodwill gesture waived the excess.  

 

Lesson

Insurance policies are contracts where an insurer agrees to cover certain losses. We recommend you consider what your insurance needs are and whether you have the right type of insurance in place to cover major losses, including loss of life. It can be useful to review your insurance requirements on an annual basis as things can change and your level of cover may no longer be suitable.