Plaintiff law firm Shine Lawyers says there will be an “influx of claims” after insurers suffered a business interruption (BI) test case defeat in the High Court last week.

Head of Litigation and Loss Recovery Tracey Ryan says the court’s decision to reject any appeal on last year's Quarantine Act exclusion ruling “is an incredible outcome” for business owners who have either had their BI claims for COVID-related losses denied or have put on hold plans to make a claim pending the outcome of the test case litigation process.

“[The ruling] shows it’s looking very positive that they're going to be able to make claims on their business interruption insurance,” Ms Ryan told insuranceNEWS.com.au today.

“With the High Court refusing that special leave to appeal, it's an exceptionally positive step towards being able to have them make valid claims.”

As reported by insuranceNEWS.com.au in a Breaking News bulletin on Friday, the High Court denied the Insurance Council of Australia’s (ICA) application to appeal last year’s NSW Court of Appeal ruling that insurers can’t rely on exclusion wordings citing the now repealed Quarantine Act and subsequent amendments.

The NSW Court of Appeal ruling relates to the first test case the ICA and the Australian Financial Complaints Authority (AFCA) launched to resolve uncertainty about pandemic wordings in BI policies that still referenced the old legislation, which was replaced by the Biosecurity Act 2015.

A second test case is currently before the Federal Court, which will look at issues such as the definition of a disease, proximity of an outbreak to a business, and prevention of access. The case is scheduled for a hearing in September.

ICA says the industry is of the view that pandemics were not contemplated for coverage under most BI policies and that premiums were not collected by insurers to reflect the cost of cover for pandemics.

Following the High Court ruling, ICA urged small businesses to submit a claim if they believe they have BI cover for COVID lockdowns but warned claims may not be finalised until the conclusion of the second test case.

Ms Ryan says the High Court ruling essentially means insurers “can’t now say that the BI policies excluded COVID, because it was not declared under the Quarantine Act”.

“I know we've still got the next case to come, but this is a very good sign of what’s to come,” Ms Ryan said.

Shine Lawyers has about 60 clients whose businesses have suffered as a result of COVID lockdowns. Earlier this year the law firm commenced proceedings in the Federal Court on behalf of a Victorian gym owner whose BI claim was rejected by Hollard.

The law firm says the insurer declined the claim on grounds that COVID-19 is excluded in the BI policy, which referenced the Quarantine Act 1908.

“The reality is these people thought they were insured for these sort of events,” Ms Ryan said.

Documents filed to the High Court last year said Quarantine Act issues affected more than 250,000 BI policies and potential claims were estimated at $10 billion.