In February 2020, there was some significant damage in an apartment Christine owned and her tenants had to move out. Christine submitted a claim to her insurer to cover the repair costs.
Unfortunately, before the claim was able to be settled, New Zealand went into COVID-19 level 4 lockdown in March 2020.
This meant that by the time the repairs were completed, and Christine had arranged new tenants after the lockdown, she had lost about $3,000 in rent.
Christine made a further claim for lost rents, which the insurer declined. They pointed to a policy exclusion clause saying that there was no cover for any losses directly or indirectly caused by a notifiable disease under the Health Act 1956 (the notifiable disease exclusion), and COVID-19 was a notifiable disease.
Not accepting the insurer’s decision on the lost rent claim, Christine contacted FSCL.
Christine was firm in her view that the insurer had incorrectly declined her lost rent claim, while the insurer maintained their view there was no cover.
Christine then complained to FSCL, and we started our investigation.
Early on in the investigation the insurer said that, upon reviewing their file, they could see that Christine’s policy had been amended, and the notifiable disease exclusion no longer applied to her policy.
However, they also pointed out that there did not appear to be any cover under any insuring clause in the policy (a clause that provides cover) for loss of rent in the circumstances of Christine’s claim.
There was a policy clause called the ‘public authorities insuring clause’, which provided cover if someone suffers a loss where any action by a public authority (for example, a COVID-19 lockdown) caused loss. However, for that clause to be triggered, there needed to be bodily injury, or a threat of bodily injury (i.e the threat of COVID-19), to any person in the vicinity of the premises (the apartment).
We agreed with the insurer’s interpretation of the public authorities clause and, because there was no specific threat of COVID-19 in the vicinity of Christine’s apartment, the policy did not provide cover for Christine’s loss of rent.
We issued a final decision that Christine’s claim about the lost rents was correctly declined.
Insights for participants
This was an interesting case that touched on the issue of how business interruption policies will respond to claims arising out of the COVID-19 pandemic. There is ongoing international litigation on this issue, including about ‘vicinity’ or ‘proximity’ requirements in policies, which insurers will be watching closely.