1300 268 371
1300 268 371

Business Continuity In The Face Of Coronavirus

Traditionally, business interruption policies only cover disruption to a business as a result of damage to ‘insured property’. However, over time, insurers widened the protection to provide coverage as a result of a closure of the business by a public authority for a number of risks, including infectious disease.

This was designed to cover things such as an outbreak of Legionnaires disease, or measles; which can close down one or two buildings disrupting a small number of businesses. Notwithstanding this, some policies provide coverage for an outbreak up to 50 kilometres from the business location, but most only cover at or near the premises insured.  

While there may be exceptions, where a specialist business has secured very specialist global insurance, the cover afforded by both business packs and standard Industry Special Risks policies, are not intended to cover disruption caused by an outbreak in a different state, let alone a different country.   

The outbreak of the SARS (Severe Acute Respiratory Syndrome) in 2013, prompted insurers and reinsurers to do modeling as to just how large claims could amount to in the event of a major pandemic such as the Spanish Flu, which lasted from January 1918 – December 1920, and resulted in the death of anywhere between 40 and 100 million people.  The reality is that the global funds held by insurers could not meet business interruption claims arising from such a large scale pandemic.

We would have no insurance industry to protect against the traditional insured perils. Not wishing to strip away the coverage that was being offered for localised infectious disease outbreaks insurers –prompted by reinsurers– added an exclusion to their policies, stating that disruption from a number of highly effective diseases were not covered.   

As such, diseases can arise at any time and originate from new sources, the insurance industry introduced a clause which excludes any disease that is notifiable under the Quarantine Act 1908 (Cth), which has been updated by many insurers in line with changes in legislation to the Biosecurity Act 2015 (Cth).

As of the end of January 2020, Coronavirus is a listed disease and so all, but a few, policies exclusions will take effect. This means that regrettably there is no insurance protection for disruptions to business arising from Coronavirus.  As with any other threat, it is important to consider what risk management measures you can introduce to mitigate the risk to your staff, customers and business.

Risk Management Tips

How to avoid infection: 
Recommended Actions for your organization:
Keep Informed

Everyone should remain alert for updates and advice from the relevant authorities on additional steps to manage the spread of the disease. The health department in each state is providing excellent resources, advice and regular updates.  Before travelling, check for and take the advice of any travel warnings on smartraveller.gov.au.

Business Continuity Management Planning 

A pandemic is just one risk facing modern organisations. Having a fully documented and exercised business continuity management plan is important for every business.  

LMI group provide a broad range of services to the insurance industry and are market leaders to find out more see the link below or visit www.continuitycoach.com to learn more.



The advice in this paper is general in nature. While the utmost care has been taken in the preparation of this preliminary advice or opinion, you use it at your own risk. LMI Group specifically disclaims any liability, whether based in contract, tort, negligence or otherwise, for any direct, indirect, incidental, punitive, consequential or other damage arising out of or in any way connected with the use of or reliance on the content of the preliminary advice or opinion.

If you have difficulty reading and/or understanding the cover provided in the policy(ies) that you have please contact your insurance adviser.