Have you made a claim on your business insurance due to the Covid-19 pandemic?

There has been much uncertainty surrounding the extent to which businesses affected by the Covid-19 Pandemic can rely on their Business Interruption Insurance for COVID-19 related losses. 

To resolve uncertainty, the Insurance Council of Australia (ICA) took the first business interruption insurance case in Australia to the court to clarify that its members’ policies did not cover pandemics. 

The Insurers lost the case and sought to appeal the decision in the High Court which was subsequently denied by the High Court on 25 June 2021. 

The Test Case 

- 4 Policyholders were insured against Business Interruption Insurance under two different Insurance Policies and sought to make a claim for Business Interruption Insurance for loses resulting from the COID-19 pandemic.

- both policies referred to the now outdated Quarantine Act 1908 (Cth) (replaced by the Biosecurity Act 2015 (Cth)) which contained the following exclusion clause:

“The cover… does not apply to any circumstances involving ‘highly Pathogenic Avian Influenza in Humans’ or other diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments” 

- The Insurers argued that the wording of the exclusion clause extended to diseases determined to be “listed human diseases” under the Biosecurity Act either because the Biosecurity Act was a “subsequent amendment” to the Quarantine Act or because references to the Quarantine Act were obvious mistakes and that it was clear the Insurers had intended to refer to the replacement Act.

- The New South Wales Supreme Court of Appeal rejected the Insurers’ argument on the basis that COVID-19 is not a diseased declared to be a quarantinable disease under the Quarantine Act and therefore the exclusion clause was not enlivened.

- The Court also rejected the Insurers’ argument that reference to the Quarantine Act was a mistake which can be corrected when construing the Contract.

What this Means for your Business 

This landmark decision, although limited to specific policy wording, means that insurers cannot now rely on references to the Quarantine Act to deny liability in policies written in the same terms as the policies referred to in this test case. Insurers have now commenced proceedings in a second test case in the Federal Court of Australia to determine the meaning of policy wordings such as the definition of diseases, proximity of outbreak to a business and prevention of access to business premises due to a government mandate. 

If your claim has previously been denied or if you have held off in making a claim because of the same exclusion in your policy (or similar), please contact Suzette Araneta on 1300 249 299 to find out how we can assist you.