Store owner loses bushfire business interruption dispute

A regional business owner who sought compensation for business interruptions due to bushfires in 2020 has lost his claims dispute against his insurer.

The complainant filed a claim for income losses at two of his stores that he said were impacted by “extensive smoke and ash damage” from nearby bushfires, which restricted the business operations.

Chubb agreed to partially cover losses of $1839 for damage to some products, which the claimant said was caused by ash staining, as well as three days of lost power.

However, the insurer disputed that it should be liable for the claimed business interruption losses, saying that the reduced business activity was due to a “general downturn and loss of attraction given the risks associated with the bushfire”.

The Australian Financial Complaints Authority (AFCA) said the business owner failed to show the stores suffered from losses that would warrant triggering business interruption cover under the industrial special risks policy.

It noted that the policy held a benefit for “consequential loss”, which covered physical loss that “interrupts or interferes with the complainant being able to carry on his business,” but said that the damage to the stores was easily fixable.

“The available information shows that the stores and some of the stock were impacted by soot and ash,” AFCA said.

“However, it also shows the complainant was able to simply clean the stores and stock with no loss of stock or damage to the stores.

“Further, that the stores remained open and in operation for the entire period despite the smoke and ash.”

AFCA acknowledged that Chubb did agree to cover the damage to the items but said this offer was made out of good faith despite limited information from the claimant on the losses.

The ruling also said that the store owner failed to prove that the losses were covered by the “Premises in the Vicinity” policy benefit, which provided liability if a nearby damaged property “prevents or hinders the use of or access to the insured stores”.

It accepted that damage occurred to a neighbouring property but said this event did not prevent access to the stores.

It also acknowledged that some roads had been closed due to the fires but that this would not meet the requirements for cover under the benefit.

“The complainant must show that these road closures were due to property damage caused by an insured peril and that such property damage was in the vicinity of the stores,” AFCA said.

“The available information does not show the road closures were due to this.”

AFCA agreed with the insurer’s assessment that the reason for the losses was “more consistent with a loss of attraction and downturn of business, given tourists form a significant portion of the stores’ business”.

It said it was not “the intention of the policy to cover loss arising from the public election not to visit a location in risky circumstances,” and that Chubb’s assessment of the claim was fair.

The ruling also shot down the complainant’s challenge to have Chubb cover consultancy costs of $8280, which were used to prepare the claim. It said it would not be fair to require the insurer to cover the expenses given that they stemmed from the rejected business interruption claim.

Click here for the ruling.