Appeal decision delivered on second business Interruption test case on claims for COVID-19 pandemic 

The second business interruption (BI) test case regarding claims activated by the COVID-19 pandemic appeal decision was delivered by the Full Court on Monday (21 February). The summary released by the Federal Court of Australia states the Full Court has, in most part, upheld the Federal Court decision handed down in October 2021. 

Last year, the Insurance Council of Australia’s (ICA) second BI test case was heard in the Federal Court with the judgement handed down on Friday 8 October 2021. The second test case included nine small business claims from various sectors and locations that had been lodged with the Australian Financial Complaints Authority. Insurers involved are Allianz, Chubb, Guild Insurance, IAG and Swiss Re. Another case involving QBE was also included in the proceedings. The Court ruled in favour of insurers, meaning many insurance policies were unlikely to provide cover for business interruption as a result of the COVID-19 pandemic

However, an appeal was lodged and the Full Court delivered an appeals decision yesterday. As reported in Insurance news, ‘Justice Mark Moshinsky says the Full Court has “substantially agreed” with the findings of Federal Court Justice Jayne Jagot, who heard the ICA second test case last October.’

The long wait for small businesses  

The very first test case was heard back in November 2020, where the NSW Court of Appeal ruled that where pandemic exclusion wording references the Quarantine Act 1908 in a business interruption insurance policy, it cannot be used to exclude from cover. However, policies where an exclusion references the Biosecurity Act 2015, this ruling has no affect.

In December 2020, the Insurance Council of Australia (ICA) fought to overturn this judgment by lodging an application to appeal to the High Court of Australia. Following a briefing on Friday 25 June 2021, the High Court announced it ‘will not grant leave to appeal’ meaning the NSW Court of Appeal ruling would remain. 

In October 2021, the Federal Court ruling for the second business interruption test case was handed down with Justice Jayne Jagot announcing, “Other than in one case [IAG/Meridian Travel] I have concluded that the insuring clauses do not apply in the circumstances of each case.” An appeal was lodged, and the Full Court delivered their decision on Monday (21 February 2022) which largely upheld the Federal Court ruling. 

Parties now have 28 days to decide if they will appeal to the High Court.  

Pharmacy insurance specialist, Carollo Horton CEO, Giuseppe Carollo, highlighted that these decisions are tough on small businesses who were seeking at insurance payout for business interruption from COVID-19 pandemic. “It’s been a long battle. There is still the possibility of a High Court appeal but it’s increasingly unlikely that many businesses receive a payout.” 

“We understand it has been difficult not having the certainty around these decisions for many months now. There have been many issues concerning the interpretation of business interruption policies that had to be decided. This was the reason for the second business interruption test case,” said Carollo

Carollo added, that with Pharmacies being able to trade throughout most of the pandemic with some restrictions, the claim will need to be assessed not only against the policy but also around certain circumstances and how the pharmacy traded during the period. 

Pharmacies should speak with their insurance broker if they are seeking clarity over this latest appeal decision and how it affects their insurance policies in relation to business interruption from the pandemic. 

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