A fitness centre in Melbourne’s eastern suburbs has failed to convince the Australian Financial Complaints Authority (AFCA) that its business interruption claim should be covered, after arguing that “a clear and unbroken chain of causation” linked local covid outbreaks to wider closure orders. 

The complainant argued that a Federal Court test case did not consider Australian Health Protection Principal Committee (AHPPC) advice given to National Cabinet and the reasons why business closure orders were recommended. 

The policyholder says previous AFCA determinations have adopted the test case findings without addressing their limitations and otherwise available evidence, and material now before AFCA “shows a clear and unbroken chain of causation, stating clearly that the closure of businesses was recommended by the AHPPC because of existing outbreaks of Covid-19 in Melbourne”. 

But AFCA says the Federal Court justice hearing the test case had referred to a series of announcements made by various bodies, which referred to advice that the AHPPC had provided to the National Cabinet. 

“The panel accepts that most likely the Federal Court was aware of the role which the AHPPC played in determining a policy response to the pandemic,” AFCA says. 

Consistent with the Federal Court findings, the Victorian government directions in March 2020 were general directions and the result of concern for the public health risk that covid presented to the state. 

“The orders were not as a result of an outbreak at or within a 20-kilometre radius of the complainant’s premises,” it says. “There is no reference to the complainant’s premises or surrounding area. There were no specific government orders specifying business locations.” 

The complainant also argued that July 8 orders for 31 municipalities plus a shire, should result in cover, and the test case hadn’t addressed more geographically targeted public health orders. 

The AFCA panel considered that the directions were not imposed as a result of any specific outbreak that occurred within 20 kilometres of the complainant’s premises and the closure was likely a result of the threat across the broader metropolitan area and associated risk to the state. 

It found that in the circumstances it was fair for AIG Australia to decline the claim. 

In another business interruption matter, AFCA found in favour of Allianz in a dispute with a Queensland wholesale bakery, which was able to continue trading, but had to reduce staff and limit production, with part of its facilities closed, resulting in a significant income drop. 

AFCA says the premises were not a non-essential business and there was no evidence that any person who might otherwise have accessed the premises and stayed couldn’t do so due to a direction. 

As a result, cover provided by an extension requiring a legal authority closing or evacuating all or part of the premises didn’t apply. 

The bakery also argued that although March orders were intended to reduce the covid risk to the entire state, “the critical point is that the risk was created by the fact that outbreaks existed within Queensland including the Gold Coast, as set out in AHPPC advice”. 

AFCA pointed to the Full Court decision on the Taphouse Townsville claim, which noted that directions were not made as a result of outbreaks near that premises, nor as a result of outbreaks “in each and every part of Queensland, such that it could be said that the directions were a result of the outbreak or outbreaks within the radius of 20 kilometres of the premises”. 

The decisions are available here and here.