After the New South Wales (NSW) Court of Appeal ruled against insurers in a test case related to business interruption (BI) losses arising from COVID-19, the board of the Insurance Council of Australia (ICA) has now agreed that an application for special leave is to be made to the High Court of Australia to appeal this ruling.
According to a statement from ICA, the option for an appeal by either the insurers or the insured was agreed to in the original decision to seek an outcome from the courts. If special leave to appeal is granted, the ICA will seek for the matter to be heard in the High Court as quickly as possible.
BI test case decision
Last month, the NSW Court of Appeal handed down its decision on the BI test case that was initiated by the ICA and Australian Financial Complaints Authority. The test case was launched to resolve the uncertainty surrounding potentially outdated wording in pandemic exclusions.
Several insurers in Australia have denied coronavirus-related BI claims because their policies specifically excluded disruption caused by ‘quarantinable diseases’. However, these policies referred to the Quarantine Act, which was repealed in 2015 and replaced with the Biosecurity Act.
Despite the insurers arguing that the intent of the clauses was clearly to exclude a pandemic even after amendments in the Biosecurity Act, the NSW court said that COVID-19 is not “declared to be a quarantinable disease under the Quarantine Act 1908 and subsequent amendments”, and “accordingly was not excluded from the disease benefit clauses”.
ICA said that the insurance industry is sympathetic to businesses, particularly SMEs, which have experienced hardship as a result of COVID-19 restrictions. However, the industry holds the view that pandemics were not contemplated for coverage under most BI policies and that the Quarantine Act exclusion excludes COVID-19 related claims.
The association pointed out that premiums were not collected to reflect the cost of cover for pandemics and reinsurance was not generally available for pandemic cover, nor were reserves established for pandemic-related claims.