Bikie gang blocks insurance for business estate – why SMEs must disclose risk

A group of 81 Melbourne business owners are bracing for their insurance to be ceased after a neighbouring bikie gang sparked a fire bomb attack, News Ltd reported.

Companies and factories in a business estate in the Melbourne suburb of Dandenong have been told their $30 million insurance policy with CHU Insurance will not be renewed at the end of August, the report said.

“Moral risk” was cited as the reason for lack of renewal. The local businesses want the Bandido Motorcycle Club to be removed from the street, so that they can recover their insurance.

A fire bomb reportedly exploded on July 24 outside the bikie clubhouse, causing damage to surrounding buildings.

The managing director of insurance broker firm Trade Risk, Shane Moore, told SmartCompany this morning that this case was a unique scenario, but one that demonstrates the issue of what risk companies need to disclose to insurance agencies.

The question of “undesirable neighbours” is not one routinely asked by insurance agencies, Moore explains. He says normally insurance agencies focus on issues of location in relation to environmental hazards, such as gas pipelines or mining sites.

“You do have a duty of disclosure”, he says. “You have to ask, are there any circumstances that could increase risk?

“The idea of ‘risk’ is open to interpretation… Whether you decide a bikie gang next door is a risk is up to you.”

In this instance, he believes it was the fire bomb, not the nature of the bikie clubhouse, which has raised the alarm bell with insurers.

However, Moore says that as a business owner, if you knew you had a bikie clubhouse next door, and it was perceived as “reasonable” that this could cause increase risk, you would be best to disclose it to insurers.

Failing to do so could lead to a claim being refused. If it went to court, the judge would have to decide if a “reasonable” person would have considered the situation a risk, he says.

Other businesses that can raise the issue of “moral risk” with insurers include nightclubs, brothels, strip clubs and gun shops.