Business interruption cover for the Optus outage is unlikely to be available in most cases due to requirements around physical damage and time limits, insurance lawyers say.
Clayton Utz Melbourne Partner Lucy Terracall says businesses may want to consider their insurance position but early indications suggest that “recourse to common forms of business insurance may be limited at best”.
The most common industrial special risks wording is aimed at damage to the insured’s property and losses flowing from that, Clayton Utz says.
Some policies have extensions for utilities outages providing cover even where there has been no physical damage to the insured’s own property, but issues include whether the wording includes telecommunications, or only applies to electricity, gas and water. Waiting periods and a sub-limit may also apply.
The Optus mobile, internet and fixed phone line outage on Wednesday started at about 4am, leaving millions of customers without service until at least early afternoon when services started to be restored.
The company has said the outage was caused by a “network event” that caused a “cascading failure”, indicating that it was not considered to be the result of a cyber attack. Optus was yet to provide further details by Monday morning.
“The consensus among the reported experts appears to be that ‘network technical issues’ happen and cannot be completely avoided. That makes such risks, in principle, eminently insurable,” Ms Terracall said.
The conclusion to be drawn from wordings is that there is a business opportunity for insurers who wish to explore it, she says.
Clyde & Co Partner Gareth Horne says the availability of cover will depend on the wording of the individual policy, but in general terms, there’s not expected to be any first party insurance cover of significance, if at all, in regards to the Optus interruption.
Berrill and Watson Lawyers Principal John Berrill says physical damage to a provider’s infrastructure can lead to cover, but time hurdles can include that interruptions last at least 48 or 72
“There is a pathway but it is very limited,” he said. “We need to know what the cause of the outage is, and most of the policies have waiting periods.”
The mobile and internet outage affected customer service operations at insurers including IAG, Zurich and QBE on Wednesday morning.
IAG said the impacts included that customers couldn’t contact its call centre and consultants couldn’t call customers. It advised of other options for getting in touch to lodge or discuss a claim or buy insurance policies.
Zurich posted on LinkedIn that it was aware that the widespread communications outage may be impacting the ability of policyholders to contact the company, and said customer service teams may be unable to make outbound calls as well.
QBE says some of its inbound call centre lines were temporarily impacted, while outbound calls were unaffected.