Appeal now set for second business Interruption test case on claims for COVID-19 pandemic

Appeal now set for second business Interruption test case on claims for COVID-19 pandemic

The Insurance Council of Australia’s (ICA) second business interruption test case regarding claims activated by the COVID-19 pandemic has now been heard in the Federal Court with judgement handed down on Friday 8 October. 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 are unlikely to provide cover for business interruption as a result of the COVID-19 pandemic. An appeal has already been lodged and set aside for early November.

In the first test case heard in November 2020, 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 the latest Federal Court ruling for the second business interruption test case Justice Jayne Jagot announced, “Other than in one case [IAG/Meridian Travel] I have concluded that the insuring clauses do not apply in the circumstances of each case.”

Pharmacy insurance specialist, Carollo Horton CEO, Giuseppe Carollo, highlighted the frustrations policyholders must feel with waiting for these final decisions and the disappointment from the second test case ruling. “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.”

“Once insurers have the final rulings, they will be consistently applied when assessing a claim for business interruption related to the COVID-19 pandemic and claims will be made a priority.”

“Due to 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. Your insurance broker should guide you through this process.”

Carollo added, “pharmacies should speak with their insurance broker if they are seeking clarity over the second business interruption test case ruling and how it affects their insurance policies in relation to business interruption from the pandemic.”

“Pharmacies play an important role in the communities they serve and especially now during the pandemic. Some pharmacies have been more affected than others so each claim for business interruption needs to be transparent and consistent,” Carollo said.

With the ongoing legal proceedings and an appeal expected in early November, pharmacies who have made a claim will need to wait until the final appeal to know if they are fully covered.

Contact us on 1300 227 655 if you would like more clarity over the second business interruption test case ruling and how it affects your insurance policies in relation to business interruption from the pandemic.