Melbourne venues including the Transport Hotel and Public Bar at Federation Square have lost a covid-related business interruption dispute heard in the Supreme Court of Victoria.

The venues argued their policies were broader than those already considered in an industry business interruption test case that went largely in favour of insurers, and they sought cover totalling millions of dollars.

The policy wordings referred to interruptions arising “directly or indirectly” from closures of the premises or “other premises in the vicinity” by order of authorities due to disease occurring “at such premises”. Unlike some policies, a specific kilometre radius was not specified.

Justice Jim Delany found in favour of insurers after looking at the construction of a policy clause that contained “a very long sentence in which alternatives separated by ‘or’ are a recurrent feature”.  Arguments also centred on the use of the words “such premises”.

“I do not accept the constructional premise for which the plaintiffs contend,” he said.

Justice Delany said if the policyholders had won on the policy construction issue, they still would not have been able to receive cover under a “factual premise”, which also involved constructional issues.

The insureds argued government lockdown directions arose from covid occurring at premises in the vicinity of the insureds, and that “vicinity” could mean the Greater Melbourne region or local government areas in which a venue was located.

Justice Delaney rejected use of “artificial boundaries” and found “vicinity” referred to “near or about” and “in the neighbourhood”.

The stated purpose of March 2020 lockdown directions was to limit the spread of covid and did not support a finding that the directions arose “directly or indirectly” from cases in the vicinity of the premises, he said.

A second lockdown in Victoria from July 8 included targeted restrictions in Greater Melbourne. Policyholders pointed to more detailed information on outbreaks to argue the lockdown arose at least “indirectly” from outbreaks in the Melbourne region or its local government areas.

Justice Delaney accepted the evidence “supports a finding” that the cumulative number of cases in Greater Melbourne was an indirect cause of the second lockdown directions.

“Because I do not agree with the plaintiffs that the ‘vicinity’ of the premises is properly construed as a reference to cases anywhere else in Greater Melbourne, the plaintiffs fail on this point,” he said. “If I am wrong as to the meaning of ‘vicinity’, they succeed in relation to this issue concerning the second lockdown only.”

Venues involved in the proceedings also included the Notting Hill Hotel and others in the Melbourne CBD, Docklands, Brighton and Black Rock. Insurers involved were Arch Underwriting at Lloyd’s (Australia), Chubb, The Underwriting Member of Syndicate 2003 at Lloyd’s, and Berkshire Hathaway Specialty Insurance.

The decision is available here.

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