The power outage occurred on March 1, 2022, when the energy supplier preemptively shut off electricity due to safety concerns amid severe storms and flooding. Power was restored on March 8, after emergency services deemed it safe. The insurer argued that the flood was the primary cause of the power outage and, consequently, the stock loss, thereby invoking the flood exclusion clause.
However, AFCA determined that the proximate cause of the stock loss was the energy supplier's decision to cut power, not the flood itself. The ruling emphasized that the flood did not directly cause the stock loss; rather, it was the power outage initiated by the supplier's safety measures. As a result, AFCA ordered the insurer to compensate the seafood business for $119,824 in stock losses and $17,884 for business interruption, along with claim preparation costs and applicable interest.
This decision underscores the importance of understanding the specific terms and conditions of business insurance policies, particularly regarding exclusions and the definitions of proximate causes. For restaurant and café owners, this ruling highlights the necessity of ensuring comprehensive coverage that addresses potential business interruptions resulting from power outages, especially those stemming from natural disasters.
To safeguard against similar scenarios, business owners should:
- Review their insurance policies to understand coverage limitations and exclusions related to power outages and natural disasters.
- Consider adding specific endorsements or riders that cover stock deterioration due to power failures.
- Maintain open communication with insurance providers to clarify coverage details and ensure policies align with their business needs.
By proactively addressing these aspects, restaurant and café owners can better protect their businesses from unforeseen events and ensure financial stability in the face of challenges.
