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ICA announces launch of second business interruption test case

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Federal Court of Australia proceedings have commenced to test the application of “further issues” in relation to pandemic coverage in business interruption (BI) policies.

As has reported, insurers lost an initial test case last year after the NSW Court of Appeal ruled insurers could not rely on exclusions that referenced the now repealed Quarantine Act.

The industry is seeking leave to appeal that decision, but the Insurance Council of Australia (ICA) today welcomed the launch of a second test case which will look at issues such as the definition of a disease, proximity of an outbreak to a business, and prevention of access.

Lawyers representing participating insurers have filed pleadings with the Federal Court to formally commence the combined case, ICA says.

“The second test case consists of nine separate small business claims lodged with the Australian Financial Complaints Authority (AFCA) as part of its dispute resolution process,” ICA said.

“The insurers represented are Allianz, IAG, Chubb, Guild, and SwissRe Corporate Solutions, and the claims cover a range of business sectors and locations.”

ICA says the industry “understands the concerns of policyholders” waiting for a determination of their claim.

“However these matters are not clear cut and there is a need to clarify the legal principles used to resolve disputes,” it says.

The case is being lodged with the Federal Court at AFCA’s request because of the range of jurisdictions represented by the nine claims. The court’s determinations will provide “clear direction and guidance” for decisions on similar issues in other disputes, ICA says.

ICA is meeting the costs of policyholders, as in the first test case.

“Insurers want this second test case brought to the court as quickly as possible so the process can be started to give certainty to policyholders and the insurance industry,” ICA CEO Andrew Hall said.

“The nine cases included have been agreed following thorough negotiations with AFCA, which reviewed 14 cases presented by insurers for consideration.

“Once final rulings have been obtained, insurers are committed to applying the relevant principles in an efficient, transparent, and consistent way when assessing customer claims.”