The Federal Court is considering a business interruption exclusion in a Vero policy that a Melbourne cafe and restaurant argues does not prevent cover for losses triggered by COVID-19 restrictions.

The case has been brought by Rockment Pty Ltd, which owns Vanilla Lounge in suburban Oakley, after a claim was denied in early May due to exclusion wordings citing the Biosecurity Act.

The dispute was expedited to a Full Court hearing that concluded on Friday before Justices Anthony Besanko, Roger Derrington and Craig Colvin.

Legal firm LGM Advisors, acting for the hospitality business, says the policy exclusion clause focuses on the biosecurity emergency or human biosecurity emergency declared under the Biosecurity Act 2015.

“The issue with that exclusion in our point of view is that certain steps follow that event, and nothing was done at the Commonwealth level pursuant to the Biosecurity Act which actually caused closures to Rockment’s business,” LGM Advisors Principal Libby Lowe tells insuranceNEWS.com.au.

“There is no reference to relevant diseases per se in the exclusion clause, it is a very specific reference to wording from that particular legislation.”

The Federal Government has taken steps in areas such as international cruise ships, airports and indigenous communities but local business trading restrictions have mostly followed various decisions taken by state and territory governments as preventive measures related to COVID-19.

“The Commonwealth could have stepped in but they didn’t, and you can see the differences between the states,” Ms Lowe says.

Court documents obtained by insuranceNEWS.com.au say Rockment has been “the subject of the ongoing and continuous declarations, directions and guidelines by the Victorian government and authorities” from about March 18.

The documents say insurer AAI has maintained that at all material times that “amongst other things” the claim made under its Retail Services Policy is excluded by wording under a sub-section headed “What we do not cover”.

The excluding clause reads “We will not pay any claim that is directly or indirectly caused by or arises from, or is in consequence of or contributed by: … (b) highly pathogenic Avian Influenza or any biosecurity or human biosecurity emergency declared under the Biosecurity Act 2015 (Cth), its subsequent amendments or successor, irrespective of whether discovered at the premises or the breakout is elsewhere…”

Suncorp, which has declined to comment on the case, has already announced expected provisions of $195 million for potential business interruption claims related to COVID-19.

No timing has been given for the Federal Court decision on the Vero matter.

An Insurance Council of Australia (ICA) test case on policies citing the repealed Quarantine Act was heard by the NSW Court of Appeal on October 2, with a decision in favour of policyholders handed down on November 18. Any appeal application must be made by the middle of this month.

A separate case, also to be heard in the Federal Court, deals with a business interruption lawsuit filed by The Star Entertainment Group against Chubb and other insurers.