The rising inflation we’re experiencing now is affecting insurance in a number of ways.

Materials commonly used to replace damaged properties, such as building items and even labour, are in short supply, driving up replacement costs.

Gavan Duffy, Managing Director HDL Insurance Brokers, says in these times, it’s important for businesses to make sure the sum insured for their assets reflects their current replacement value so that if their property is damaged, the settlement may cover the costs.

“If the sum insured is not accurate, this may impact the settlement they receive if they have to make a claim,” Duffy says.

If you’re the director of a company and you have not registered for a director ID, you could risk a penalty of up to $1.1 million.

So, if you’re among the many directors who have not yet registered for their ID, now’s the time.

The Australian Taxation Office has said penalties won’t affect anyone who applied for their director ID before 14 December 2022.

Now every director is required to apply for a director ID under the Corporations Act 2001 (Cth).

You will need to have a myGovID to apply for the director ID, so if you don’t have a myGovID it’s time to get one now.

A director ID is perennial, even if the person:

• Changes companies.
• Stops being a director.
• Changes their name.
• Moves interstate or overseas.

The director ID will help prevent the use of false or fraudulent director identities and helps the government to take action against illegal activity.

It’s also important so that shareholders, employees, creditors, consumers and know who are the directors of a company.

The 15-digit ID will make it easier for administrators of failed companies to track directors between companies.

It’s also going to help stop ‘phoenixing’. This is when the directors of a failed company start a new company, a phoenix company, to carry on the activities of the previous company, just without the debt of the previous company.

As a company director, you must apply for your director ID yourself, your tax or BAS agent can’t apply for you.

The easiest way to apply for a director ID is through www.abrs.gov.au. The ABRS is a new service the federal government has launched for managing business information. You can also apply for a director ID by filling in paper forms.

Elevated levels of disruption look set to continue in 2023 as dangers from digitalisation, the war in Ukraine, high energy prices and inflation, geopolitical and economic uncertainty, and climate change test already strained business models and supply chains, according to the Allianz Risk Barometer.

Allianz has released its latest Risk Barometer Report for 2023, which draws on the insights of 2,769 risk management experts from 92 countries and analyses the most significant risks facing businesses globally in the next year.

Cyber incidents have ranked as the most critical business risk globally for the second consecutive year. This is no surprise considering today’s digital economy, evolving threat from ransomware and cyber-attacks increasingly used during geopolitical conflicts.

For Australian respondents, Natural Catastrophes are the risk factor of most concern, driven by events such as flooding, which resulted in the country’s costliest-ever extreme weather event in 2022.

Despite positive steps taken by businesses and governments to build resilience and diversify their supply chains following the pandemic, the report indicates that elevated levels of business disruption are likely to continue well into 2023.

New privacy law sees tougher penalties and enforcement powers for serious and repeated privacy breaches.

Recent high-profile and large-scale data breaches involving Optus, Medibank Private, MyDeal and others have resulted in the personal information about millions of Australians being compromised. These data breaches may have direct and long-lasting impacts, including financial harm through identity theft or fraud, psychological harm and reputational harm.

This has highlighted the need for more effective safeguards and privacy controls used by organisations. The Privacy Legislation Amendment (Enforcement and Other Measures) Bill 2022 has been introduced to help address this problem and to push businesses to do better when it comes to their privacy, security, and information handling practices.

Businesses have been hit with plenty of disruptions over the past few years, from COVID as well as from natural disasters.

The lower house of the NSW Government has passed a Bill repealing an amendment to the Workers Compensation Act 1987 made last year in response to the COVID-19 pandemic, potentially saving businesses more than half a billion dollars in insurance premiums increases.

In July 2020, the Government passed Section 19B to the Act, which included a presumption that workers in certain industries who contracted COVID-19 had done so at work, meaning they could automatically receive workers compensation.

The amendment covered workers in industries such as healthcare, education, retail, transport, emergency services, construction, disability and aged care, dining and entertainment.

The NSW Government says that there is nowhere else in the world with automatic workers compensation rights due to COVID-19 that are as broad as those in NSW.

Similar legislation is in place in WA, where healthcare workers don’t have to prove they caught the virus while in the workplace, while the onus is on employees to prove they caught COVID-19 at work to be eligible to receive workers compensation in all other Australian states and territories.

On average, workers compensation entitlements pay employees around 80% of their earnings if they’re unable to work, while the family of employees who contract COVID-19 in the workplace and subsequently die from the disease generally receive around $1 million in compensation.

Repealing the amendment means that NSW workers will now be required to prove they contracted COVID-19 at work to gain access to workers compensation.

“Now we know more about COVID-19 and its transmission, amendments under Section 19B of the Act must be repealed so the workers compensation system is both fair to employees and ensuring businesses aren’t hit with an unexpected spike in their insurance bills,” NSW Premier Dominic Perrottet said. “Now that the economy is steadily reopening, we want businesses investing in new staff and higher wages, not inflated insurance bills.”

Recent estimates based on Doherty Institute modelling indicated that COVID-19 claims could have cost the NSW workers compensation system up to $638 million over the coming year, with more than 25,000 extra claims.

The Government says small businesses could have seen an average increase in their workers compensation insurance premiums of $950, had the legislation not been repealed.

However, there are concerns around how the change could affect workers who don’t contract the disease at work, or are unable to prove they did catch it at work, and end up suffering from long COVID, as questions have been raised over whether sick leave provisions would cover an extended period off work.

The Bill is yet to be heard by the NSW upper house.

A new decision provides more guidance in Australia around whether business interruption insurance policies cover businesses for losses related to COVID-19.

On 8 October 2021, the Federal Court of Australia handed down its first instance decision in the second Australian business interruption insurance test case, Swiss Re International Se v LCA Marrickville Pty Limited [2021] FCA 1206 (Second Test Case). The decision is the latest judicial guidance in Australia around whether certain business interruption insurance policies provide cover to businesses for losses arising from Novel Coronavirus SARS-CoV-2 (COVID-19).

After the First Test Case, which addressed whether a specific exclusion in business interruption insurance policies would exclude COVID-19-related losses, the market identified a number of outstanding questions in those policies which required legal guidance. In the Second Test Case, Justice Jagot in the Federal Court addressed those issues in detail.

In short, the Court identified four types of insuring clause (and policy extensions) under which claims for COVID-19 business interruption losses could arise. Only one of those clauses – the ‘Disease Clause’ – could entitle a business to activate its policy according to the Second Test Case. As to the other three, the Court found that closure or restriction orders from the Commonwealth or State Governments were not made as a result of disease, damage or threat at or near the insureds’ premises.

As such, cover was not available to the insureds under those clauses. It also found that COVID-19 was not a ‘catastrophe’ in the context of the particular insurance policies examined, so that clause also would not provide cover to the insureds.

Following this decision, many policyholders are still asking the question ‘will my policy respond?’

The answer remains that it will depend on the policy in question, coupled with the particular facts giving rise to a claim.

The outcome in this decision is on appeal, and we will be reporting further on developments following the appeal.

It is common for commercial contracts to be used by the parties to allocate and transfer risk.

Such contracts frequently include mechanisms of allocating or altering risk, by which one party (e.g. principal) seeks to transfer all or part of their liability to another party (e.g. contractor).

The most common types of clauses include:

• clauses which impose a higher standard of care or a more onerous measure of damage
• indemnity clauses which require one party to pay the liabilities, costs, expenses and loss of the other party arising from the performance of the contract
• releases by which one party agrees to release the other party (invariably the principal) from liability

It is also common for commercial contracts to contain insurance clauses which require one party to arrange a specified type and level of insurance in respect of obligations connected with the contract. Often such clauses will require that the cover extends to certain obligations of the principal, head contractors, subcontractors and others.

It is important to understand these clauses and their interaction with each other when assessing your insurance needs. You should provide copies of all relevant contracts to HDL as your insurance broker to enable us to help ensure that cover is obtained which meets your insurance obligations and, to the extent possible, your contractual liabilities.

To the extent that cover is not available, you should be clear about the risk that you are undertaking by entering into the contract.

The High Court has confirmed that the administrators of public social media pages are ‘publishers’ of comments posted by third parties and members of the public on their page, for the purposes of defamation law.

Any business that hosts a public social media page, or has a comments function on their own website, should review its social media engagement processes and monitor and moderate comments to avoid the risk of liability for defamation.

The Insurance Council of Australia (ICA) welcomes the commencement today of the second business interruption test case hearing before the Federal Court of Australia.

The hearing brings insurers and policyholders a significant step closer to having clarity and certainty on a number of key issues relating to pandemic coverage in business interruption policies.

The second test case, which is scheduled to run until 15 September, will determine the meaning of policy wordings around disease definition, Covid-19 outbreak proximity, the impact of government mandates, and other policy wording matters.

It consists of nine small business claims from a range of business sectors and locations lodged with Australian Financial Complaints Authority as part of its dispute resolution process.

At the same time, the Federal Court will hear a separate case brought by QBE regarding the interpretation of Victorian property legislation which has the potential to impact business interruption policies written under Victorian law.

Insurers represented in the second test case are Allianz, IAG, Chubb, Guild, and SwissRe Corporate Solutions, however all Insurance Council members have committed to applying the rulings of the courts in this and the first business interruption test case in a consistent way when assessing business interruption claims.

The industry will meet the costs of policyholders in the second test case, as it did in the first test case.

A live video stream of the hearing is available here.

Comment attributable to ICA CEO Andrew Hall:

The commencement of the second business interruption test case hearing is an important step towards finalising this issue and providing an efficient, transparent, and consistent framework to process business interruption claims.

Insurers acknowledge the frustrations of policyholders who have been waiting to have claims resolved, however the unprecedented nature of this pandemic has meant court determinations have been necessary to establish the principles insurers need to process claims and resolve disputes.

Insurers have taken a number of steps to ensure these claims will be prioritised when final rulings are made.

If policyholders believe they have a claim against their business interruption cover they are encouraged to contact their insurer or broker who will provide them with the information they need to lodge.