Insurers are working through the details of the business interruption Full Court decision that went mostly in their favour yesterday as the parties consider whether issues should be pursued through a High Court appeal application.

The Insurance Council of Australia (ICA) says the Full Court judgment substantially upholds the Federal Court decision delivered last October by Justice Jayne Jagot, and marks another important step in seeking clarity for policyholders and the general insurance sector.

“These matters are not clear cut and we acknowledge that this has been a long but necessary process that will ultimately provide important guidance on how business interruption policy wordings are to be interpreted and applied,” CEO Andrew Hall said. “We hope that the matter can be brought to a close as soon as possible.”

Parties have a 28-day window from the decision in which to apply for special leave to appeal to the High Court.

Australian listed insurers IAG, QBE and Suncorp noted the decision this morning, while making no changes to provisions for potential business interruption claims.

IAG, which has the largest net provision of $1.2 billion for potential claims, was involved in two of the cases before the Full Court.

“IAG is reviewing the judgment to determine whether to seek leave to appeal any aspect of the judgment,” it said in a statement to the Australian Securities Exchange.

“As the legal position becomes more certain and claims experience emerges, IAG will refine the prediction of ultimate claim costs and adjust its provision accordingly.”

Subject to appeal process outcomes, indications are that a release from the provision will occur, and is likely to be recognised over time, subject to court processes and the time required to allow for claims development, the company says.

Clyde & Co Partner Gareth Horne says the Full Court decision had reinforced that insurers were not providing a form of pandemic cover and were providing policies based on actuarially assessed risks. The justices had also underscored differences between the Australian and UK situations.

“The insurers I think consolidated and added to their success in terms of policy trigger issues and the gateway to cover,” he told insuranceNEWS.com.au. “There were some positive peripheral findings for the insureds.”

For policyholders, the court again found that Quarantine Act wordings could not be used to exclude cover, there were changes on the evidentiary burden for what constitutes an outbreak and the decision means, subject to the wordings, loss calculation might not be reduced by supports such as Jobkeeper.

Berrill & Watson Principal John Berrill says insurers have been criticised over the lengthy process and may choose not to pursue a High Court appeal on the matters that went against them, while it is unclear if test case funding arrangements extend to a further appeal on behalf of policyholders.

The ICA has funded both sides through the first and second test cases, which have been drawn from disputes that would otherwise be handled through the Australian Financial Complaints Authority (AFCA).

AFCA had registered 310 complaints in relation to covid and business interruption insurance as of yesterday. About 280 remain open.

Mr Berrill says only a small proportion of businesses have actually made claims, but there could still be thousands of businesses with policies that would respond and there could still be valid claims from the first 2020 lockdowns and following restrictions.

“Much as a substantial part of Justice Jagot’s findings remain intact, there is still a pathway forward for a significant proportion of policyholders, depending on the type of policy and the wording in the policy,” he said.

Preliminary hearings concerning four business interruption class actions are also in the wings after they were scheduled for April, providing time for the Full Court implications to be considered.

AFCA says legal clarity is important for insurers, their customers and those who have filed complaints with the organisation and it’s reviewing the latest judgment.

“It is not known at this stage whether any parties will seek special leave to appeal to the High Court. In this event AFCA would continue to pause complaints that might be affected by any further court ruling,” it says.

“The progress of complaints in the AFCA process could also be affected by class actions that have been lodged with the Federal Court.”