David Kimber – Citycover Insurance Adviser
A recent fire at Inala Shopping Centre has sparked another conversation about Business Interruption Insurance. Over 50 firefighters were needed to bring this large blaze under control in Brisbane’s south-west on August 26th 2017.
The centre housed restaurants, a chemist, and a medical centre, which were all alight when fire crews arrived at the scene at 1.30am. Up to 15 businesses were directly destroyed, or damaged by the fire, and the power was shut down to the complex affecting other businesses in the area.
Many companies had to cease trading, and the entire street was sealed off due to the extreme fire damage, with the roof collapsing, smoke and soot damage.
A devastating event such as this one, reminds us of the importance to consider Business Interruption insurance.
You could be covered if your business suffered fire damage, but you might not have cover if it’s a business nearby that goes up around you, and then impacts your ability to continue to trade.
This could impact you for days, weeks, or months, as it takes time for buildings to be cleaned, rebuilt and restored.
Another example of an event that caused a number of businesses to cease trading, was the contamination of Town Water supply in Roma back in 2012.
An outbreak of Salmonella contaminated Roma’s water system of 14 deep bores, six reservoirs and three underground storage tanks, which were interconnected via the reticulation system.
This affected a number of local businesses, and those which heavily relied on water to operate (i.e. Dentists), were unable to trade at the same capacity for some time. This caused a downturn in many business operations, and the loss of income for those businesses, would have been able to be claimed for under a Business Interruption insurance policy.
Events such as the Inala Shopping Centre fire and Roma’s contaminated water supply can immediately have the following effects on your business:
- Production is disrupted
- Income falls drastically
- Redundancy and other payments may have to be made to employees who lose their jobs
- Emergency measures, like hire of other premises and plant, must be paid for
- Delays in rebuilding and replacement of plant can drain capital
- Lost orders and a subsequent loss of customers may never be recouped
- Recruiting and training new staff can delay recovery
- Net profit can become a net loss
Risk Management plans should consider the loss of cash flow, as well as the provision of material damage cover for buildings, plant and stock.
Interruption to trading may last for a few months, a year or even longer. There is also the immediate extra expenses to get your business going again, as quickly as possible, so that you don’t ultimately loose your customers as well.
To discuss Business Interruption insurance in more detail and how this cover will respond in the event of a catastrophe, call your Insurance Adviser on (07) 3270 1500.