A pharmacy located inside a Victorian hospital has lost a battle over a business interruption claim lodged after pandemic restrictions prevented potential customers accessing the store.

Hospital Visitor Directions issued from March 23 2020 onwards meant only patients, workers and a limited number and class of visitors were allowed to enter any hospital in the state.

The pharmacy, which couldn’t be accessed without first entering the hospital, said there was no doubt a contagious infectious disease was present at the hospital, and there was a closure of part of the property within which the business is located.

Guild Insurance declined the claim as there was no order for closure of the pharmacy, there was no evidence of discovery of covid at the premises and the government orders weren’t made due to the discovery of covid at the premises.

The Australian Financial Complaints Authority (AFCA) decided in favour of the insurer after drawing on guidance from the second industry business interruption test case, heard in the Federal Court initially and in the Full Court on appeal.

AFCA says most of the public, who previously freely accessed the pharmacy, were prohibited from entering, the directions went beyond number caps or social distance requirements, and while the pharmacy continued to trade, there was a partial closure.

But the policy hybrid clause refers to a whole or partial premises closure by order of a government or statutory authority arising from “human infectious or contagious diseases or the discovery of an organism likely to result in human infectious or contagious disease at the business premises”.

AFCA says the policy wording points to the business premises as being the shop alone and not the hospital building.

“If ‘Business Premises’ meant the whole hospital, that would mean, for example, the policy required the complainants to maintain the whole hospital in good working condition and to give the insurer access to the whole hospital on demand. That cannot be the correct interpretation,” it says.

AFCA also took into account Full Court observations in the Meridian test case claim, which clarified that discovery “at the situation” was key in certain wording.

In the dispute before AFCA, there was no evidence provided of covid cases at the pharmacy itself, nor of an organism likely to result in covid, such as SARS-CoV-2 virus, even though it was reasonable to assume people with covid and the virus were at the hospital, the decision says.

The visitor directions order wasn’t made due to a discovery of a relevant organism at the business premises and it was fair for the insurer to rely upon the policy terms and conditions to decline the claim.

“The orders were made ‘to prohibit non-essential visits and access to hospitals to limit the spread of severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) within a particularly vulnerable population.’ The orders were not specific to the business premises but applied to all hospitals to protect public health,” AFCA says.

The decision is available here.