Brought to you by:
Berkley Insurance Australia
Berkley Insurance Australia

Federal Court to deliver BI test case decision tomorrow

Facebook Twitter LinkedIn Google

A Federal Court judgment on the Insurance Council of Australia (ICA) second business interruption test case on COVID-19 claims will be delivered tomorrow afternoon (Friday Oct 8) in an expedited decision.

Justice Jayne Jagot will hand down her judgment at 4.30pm via web conference after presiding over eight days of hearings that concluded on September 15. An appeal is expected to be heard by the Full Court next month.

After the judgment there will be a joint case management hearing regarding the anticipated appeals, and also about an appeal already filed in a separate dispute between The Star Entertainment Group and insurers including Chubb.

The second test case consists of nine small business claims lodged with the Australian Financial Complaints Authority (AFCA) as part of its dispute resolution process. Insurers involved are Allianz, Chubb, Guild Insurance, IAG and Swiss Re. A case involving QBE has also been rolled into the proceedings.

The ICA lost the first test case, heard last year, which centred on whether insurers could rely on exclusions referencing the Quarantine Act 1908 and subsequent amendments. The Act has since been replaced by the Biosecurity Act.

The issue came up again in some of the second test case matters, with policyholders arguing Victorian legislation had the effect of making the Quarantine wording valid in that state.

The hearings also looked at whether COVID-19 was covered under diseases clauses and whether government restrictions in response to the pandemic triggered prevention of access cover.

Arguments included that isolated instances of COVID-19 did not amount to an “outbreak” and the pandemic was outside the meaning of wordings citing “threat of damage to persons or property”.

The hearings examined claim payment calculations, if cover is triggered, including adjustments for Government assistance programs and how surrounding pandemic impacts should be taken into account.

In the UK, Financial Conduct Authority data shows policyholders have received nearly $2 billion in final and interim payments since a test case that concluded in the Supreme Court in January went largely in favour of insureds.

ICA highlights UK wordings are not the same and the Australian COVID-19 situation, including the number of infections and the government responses, has been different.

The second test represents a significant step in clarifying pandemic coverage issues, and insurers have taken steps to ensure claims will be prioritised when final rulings are made, ICA has said.

“While the insurance industry understands the frustration of policyholders who may be waiting for a determination of their claim or resolution of a dispute, these matters are not clear cut and there is a need to clarify the legal principles used to resolve any disputes,” ICA CEO Andrew Hall said last month.

The Star Entertainment Group has already lodged an appeal after its business interruption dispute went in favour of insurers. A decision in that matter was handed down by Federal Court Chief Justice James Allsop in August.