Your business lost weeks or months of revenue. You had business interruption insurance. You lodged the claim — and the insurer denied. The reasons are usually specialist: “the trigger event isn’t covered”, “the indemnity period has lapsed”, “the disease exclusion applies”, “the loss isn’t physical-damage triggered.” The financial hit on top of the original disruption is brutal.
Business interruption is the most contested commercial insurance class in Australia, and post-COVID test cases reshaped the consumer-side wins available. Here’s the playbook.
The legal framework
Business interruption sits under the Insurance Contracts Act 1984 (Cth) and the General Insurance Code of Practice (where the insured is a small business). The Insurance Council of Australia BI test cases (2020–2021, NSW Court of Appeal and Federal Court) clarified that disease exclusions referencing repealed legislation (e.g. the Quarantine Act 1908) cannot exclude pandemic-related claims — a finding still being applied to legacy policies. ASIC RG 271 applies to small-business complaints up to certain thresholds.
Common refusal reasons and how they often fail
- “Disease exclusion applies.” If the policy references a repealed or superseded Act, the exclusion may be unenforceable per the BI test cases.
- “No physical damage trigger.” Many BI policies have a “prevention of access” or “infectious disease” extension that doesn’t require physical damage. Read the schedule.
- “Indemnity period has lapsed.” The clock starts at the trigger date, not at policy renewal. Insurer often gets this wrong.
- “You didn’t mitigate.” Section 54 of the ICA limits this; you only had to act reasonably, not optimally.
- “Loss is consequential, not direct.” Modern BI wordings are broader than insurers admit.
What the document does
The Letter of Demand identifies the policy, the trigger event, the precise wording the insurer relies on, the legal flaw (often citing the BI test cases), the loss-of-profits calculation (with accountant’s letter where possible), and a deadline. It formally requests the insurer’s reasoning, expert reports, and underwriting notes under the Code.
What Claim Done delivers
Ten-minute wizard. Upload the policy schedule, the denial letter, your loss calculation. AI drafts the Letter of Demand citing the ICA, the Code, the relevant BI test cases, and the AFCA jurisdiction. Flat $79, PDF the same day. For complex denials needing a structured legal response, the legal-response document is $79.
What to expect after sending
BI insurers typically take 30–45 days to respond properly. If denied, lodge with AFCA if eligible (small-business limits apply — currently up to $5.4m in turnover and certain claim caps), or commence Federal Court / state Supreme Court proceedings. AFCA has a strong track record on BI matters where the policy wording supports the insured.