In this practice area
Disputes under commercial property, industrial special risks and business interruption policies after fire, storm, flood, theft or other damage to business assets.
When these disputes arise
Property insurance is first-party cover: it pays the insured for loss of or damage to its own property and, under business interruption sections, for the loss of income that follows. Commercial property and industrial special risks policies cover buildings, plant, stock and equipment, usually on a reinstatement or replacement basis.
Disputes arise over whether an event is covered (for example, storm or flood, sudden or gradual damage), the application of exclusions such as wear and tear or faulty design, the extent of reinstatement, the calculation of business interruption loss and the indemnity period, and alleged breaches of conditions such as security or occupancy requirements.
The legal framework
The policy wording is the starting point, read with the Insurance Contracts Act 1984 (Cth). Section 54 is especially important in property claims: an insurer cannot refuse a claim because of an act or omission after the contract was entered into, such as an unoccupied building or an inactive alarm, unless that act or omission could reasonably be regarded as capable of causing or contributing to the loss. Even then, the insured may show that no part of the loss was caused by it. Otherwise the insurer is limited to reducing its liability to the extent of its prejudice.
The insurer's duty of utmost good faith under section 13 extends to claims handling, including timeliness and fairness in assessing the loss. Since 1 January 2022 claims handling has been a financial service regulated by ASIC. Where a claim is unreasonably withheld, section 57 entitles the insured to interest. Causation questions, such as whether damage was caused by a covered peril or an excluded one, are decided on the evidence and the policy language.
How these matters run
After a loss the insurer will appoint a loss adjuster, and often engineers, forensic accountants or building consultants. The insured should keep its own records, photographs and quotes, and consider its own experts early, particularly where causation or quantum is in dispute. Business interruption claims depend on sound financial records and a clear indemnity period.
Complaints go first to the insurer's internal dispute resolution process. Eligible small businesses may take the dispute to AFCA, subject to its monetary limits. Larger or more complex claims are litigated, usually in the Supreme Court.
How GopherWood Lawyers acts
We act for businesses whose property claims have been declined, delayed or undervalued. We review the adjuster's findings, engage independent experts where needed, and put the insured's case on cover, causation and quantum.
We advise on whether AFCA or court is the better forum, and pursue interest for unreasonable delay.