The Full Court judgment favouring insurers in pandemic-related business interruption disputes has brought more clarity, but a further appeal is possible and there are still class actions in the wings.

The three justices that delivered last week’s decision were in harmony in broadly backing the findings of Federal Court Justice Jayne Jagot in the test cases, and the findings of Chief Justice James Allsop in a separate dispute involving The Star Entertainment Group.

“The decisions, which may yet be appealed to the High Court, confirm that there are severe limitations on the types of policies which respond to Covid-19 related financial loss and the circumstances in which a policyholder will be able to recover such loss,” Herbert Smith Freehills Partner Mark Darwin and Senior Associate Travis Gooding say.

The Insurance Council of Australia (ICA), which has driven the test case process and funded both sides, has responded cautiously to the judgment, noting parties have 28 days in which to apply for leave to appeal to the High Court.

IAG which has a $1.2 billion net provision for potential business interruption claims, says it will refine its prediction of ultimate claim costs as the legal position becomes more certain and claims experience emerges.

“Subject to the outcomes of the appeal process, current indications are that a release from the prevision will occur and is likely to be recognised over time, subject to court processes and the time required to allow for claims development,” it says.

The High Court rejects most appeal applications, and initiating the process would see final resolution of the second test case delayed for months.

Insurers took that path in the first test case, when the finding went against them on Quarantine Act wordings, but the High Court declined to move ahead with the matter, saying the lower court’s judgment was “not attended by sufficient doubt to warrant the grant of special leave to appeal”.

Clyde & Co Partner Gareth Horne says the Full Court decision had reinforced that insurers were not providing a form of pandemic cover and were providing policies based on actuarially assessed risks. The justices had also underscored differences between the Australian and UK situations.

“The insurers I think consolidated and added to their success in terms of policy trigger issues and the gateway to cover,” he told insuranceNEWS.com.au. “There were some positive peripheral findings for the insureds.”

Of the 10 matters initially heard by Federal Court Justice Jagot, decisions on nine largely favoured insurers. Five went to appeal, with the Full Court agreeing in four of the claims that the insuring clauses did not apply.

In the fifth, involving Melbourne-based cruise and overseas travel specialist Meridian, uncertainty remains over any potential payment since it was international border closures that more significantly affected its clientele rather than local lockdowns.

Herbert Smith Freehills says not every policy wording has been tested against every business’ circumstances, so there remains some scope for policyholders to pursue a limited category of claims within the guidelines established by the test cases.

“For example, if the policy held by the Victorian travel agent had been held by, say, a bar or restaurant in the Melbourne CBD that was reliant on walk-ins not international travellers, then the outcome for the policyholder might have been different.”

Positives for insureds include that the court again found that Quarantine Act wordings could not be used to exclude cover, and, subject to wordings, loss calculation might not be reduced by supports such as Jobkeeper. An additional favourable finding for claimants related to the calculation of interest.

Berrill & Watson Principal John Berrill also says there are some evidentiary requirement implications that could expand the possibilities for claims cover under certain types of policies.

It should also be remembered, he says, that the claims examined through the test case process were selected by insurers.

Gordon Legal and Berrill & Watson have commenced class action proceedings against QBE and Lloyd’s underwriters and Slater & Gordon has filed actions against IAG and Hollard. A case management hearing for all four matters is scheduled for April.

Slater & Gordon Senior Class Action Lawyer Mathew Chuk says the Full Court decision “makes clear” that there will be thousands of businesses with CGU and Hollard policies that are likely to have valid claims.

“It is important to bear in mind that the circumstances of the test cases used in the process are not reflective of the group at-large,” Mr Chuk says. “The Meridian ruling paves the way for many businesses with what is known as a ‘disease clause’ to make claims under their policy.”

In the High Court application last year on the Quarantine Act wordings, insurers flagged that issue affected over 250,000 policies and the amount at stake was estimated at $10 billion. While that gateway remained open, an expected deluge of claims, as other hurdles were considered, has not eventuated.

Jobkeeper and other support may have played a role, while for myriad reasons businesses may believe that it’s no longer a priority or necessary to file a claim.

“There is a tyranny of time here. It has been two years now,” Mr Berrill says. “Some of them have just moved on and some of them have gone broke, but there are thousands of viable claims out there.”