In the first case, the business relied on a specialised piece of equipment as a vital part of its operations. Unfortunately, one day an employee dropped and broke one of the machine’s essential components. Not understanding the implications of her actions, the employee then used the broken part in the machine, causing damage and rendering it unusable.
The business owner erroneously assumed the best way to expedite fixing the machine was to send it back to the supplier. But this turned out to be a false economy. Although the machine supplier sent back a report confirming the machine was broken, the supplier then lost the machine and denied ever sending a report it was broken.
Up until this point, the business owner didn’t inform her insurer about the broken part and machine. When she did, the insurer denied the claim as there was no evidence. Although the machine was no longer in her possession, there was no paper trail proving the machine was broken or that it had been sent back to the supplier. Faced with this situation, the insurer had no choice but to take the action it did.
In the second example, a car repair business had 30 cars in its yard ready to be repaired when a major hail storm came through, damaging all the vehicles on the lot. The repairer set about fixing all the hail damage the cars suffered, to ensure he maintained relationships with all his clients. Within a week, all the vehicles were fixed.
“Next time you suffer an insurable event, make sure you notify the broker as soon as it happens to ensure the best possible outcome”
Again, the repairer didn’t immediately tell the insurer about the hail damage. When he did, the insurer denied the claim because the repairer wasn’t legally liable for the hail damage. Rather, the individual car owners should have claimed for the damage against their own motor vehicle policy.
In both these cases, the business owners did have the right cover in place. But the way they went about the claims meant they were denied. Other businesses can learn from these situations.
Steadfast Group broker technical manager Michael White says it’s imperative to work with your broker to tell your insurer about a potential claim as soon as it happens.
“There's two different types of claims we need to think about. One is first party claim, in which the policyholder suffers the loss, which is the type of claim in the first example. The second one is a liability claim, in which a third party suffers a loss and makes a claim against your insurance cover for the amount of their loss. This is the situation with the car repair yard,” explains White.
With cyclones expected to migrate further south in the east coast to hit places such as the Gold Coast in the future due to climate change, the message to businesses in these areas is get ready. Here are some steps businesses can take to do this:
- Identify your risks
Look at the Insurance Council of Australia data globe, which is free and open source. Check whether your property is in a flood zone.
- Mitigate your risks
Check and fix roofs, place stock and electrical equipment above the ground floor and install a pump in the basement. “Encourage other local businesses to take similar steps, because if everyone does it the community recovers faster,” says Pui.
- Check your insurance policy
Don't assume you're covered for flood, rain or storm water damage. Clarify how much cover you have with your broker.
Governments and local authorities also have a role to play. They have a responsibility to be aware of the latest science on seasonal forecasts of rainfalls and reservoir management. Undertaking state emergency drills also helps communities to be ready for major weather events.
“It will be harder to prepare for natural catastrophes with the current COVID focus, and restrictions. However, we can ill afford to disregard the real risk of natural catastrophe at a time when societal resilience is already being challenged. Governments and businesses have to make sure they are ready,” he adds.
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