Independent help with a business interruption claim in Australia

What the cover actually responds to

In most Australian commercial packages and industrial special risks policies, business interruption cover is triggered by insured physical damage, either to your own premises or, under certain extensions, to the premises of a supplier, customer or the area that prevents access. Without that trigger, the loss of income generally falls outside the policy.

The cover is normally measured over an indemnity period, for example 12 or 24 months, chosen when the policy was taken out. It typically compensates the reduction in gross profit, or in some wordings gross revenue or rent, plus increased costs of working incurred to limit the loss.

Who sits around the table

For a significant claim, the insurer usually appoints a loss adjuster and often its own forensic accountant. On your side, a loss assessor experienced in commercial claims, a forensic accountant or both can prepare and argue the claim. Your regular accountant knows your figures but may not be familiar with how policy definitions convert those figures into an indemnity.

Any firm handling the claim for you should be able to explain how it is authorised to provide claims handling services, since this became a licensed activity in Australia from 2021.

From the first call to the final settlement

Notify the insurer or broker promptly, even before the damage is fully known. Early notice protects your position and allows the insurer to approve emergency expenditure, such as temporary premises or overtime, that may reduce the overall loss.

The claim is then built in stages. Because trading may take months to recover, many claims are paid through progress payments based on interim calculations, followed by a final adjustment at the end of the indemnity period or when trading returns to its expected level.

• Confirm the material damage claim is accepted, as it usually triggers the interruption cover
• Agree a method for calculating the loss with the adjuster early
• Submit monthly or quarterly loss statements with supporting data
• Request progress payments to protect cash flow
• Finalise the claim with a reconciled calculation and supporting accounts

The evidence that wins or loses the argument

The core question is what the business would have earned had the damage not occurred. That counterfactual is built from historical accounts, management reports, budgets, seasonal patterns, order books and industry trends. The policy usually contains a trends or special circumstances clause allowing adjustments for factors that would have affected results anyway, positive or negative.

Gather at least two or three years of financial statements, BAS lodgements, monthly sales data, payroll records, key contracts and evidence of any growth plans that were under way before the loss.

Frequent sources of disagreement

Disputes tend to cluster around the same questions: the projected turnover the business would have achieved, which costs are genuinely saved during the interruption, whether wages are insured in full or only for a limited period, the length of the indemnity period actually needed, and whether additional expenses were reasonable. Underinsurance of the declared gross profit can also lead the insurer to reduce the claim proportionally.

Wider area events, such as floods that affect a whole town, raise their own issues: was the loss caused by your damage or by the general downturn in the area? Wording on prevention of access and denial of access extensions becomes crucial in these situations.

Mitigation and increased costs of working

Policies expect you to take reasonable steps to reduce the loss: moving to temporary premises, outsourcing production, hiring equipment or paying overtime. These increased costs of working are usually covered to the extent that they reduce the interruption loss, so keep a clear record of each decision, its cost and the revenue it protected.

Discuss significant mitigation spending with the adjuster before committing where possible. Written agreement removes a frequent source of later argument.

Time frames to keep in mind

Business interruption claims take longer than most property claims because the loss unfolds over time. Even so, the insurer should handle the claim efficiently and keep you informed. Retail and small business customers covered by the General Insurance Code of Practice benefit from its service standards on communication and decision times.

Do not let the indemnity period run out without a clear record of the loss. Late documentation is harder to verify and invites disputes.

If you cannot reach agreement

Lodge a written complaint with the insurer through its internal dispute resolution process, attaching your expert's calculations. If the outcome is unsatisfactory, eligible small businesses can take the complaint to the Australian Financial Complaints Authority, a free external dispute resolution scheme. AFCA has monetary limits, so very large commercial claims may need to be resolved through negotiation, mediation, arbitration where the policy allows, or court proceedings.

In complex disputes, an independent forensic accountant's report is often the key document for any of these forums.

A business interruption claim is won with sound financial evidence and a clear reading of the policy. If the stakes are significant, an independent expert can give your figures the structure the insurer expects.