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ICA in talks on second BI case, class actions flagged

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The Insurance Council of Australia (ICA) says it is in discussions over a second business interruption test case, while lawyers warn a class action could be pursued after a NSW Court of Appeal decision yesterday widened the door for potential payments.

ICA says it is talking with insurers, the Australian Financial Complaints Authority (AFCA) and other stakeholders about a further hearing, which could explore proximity, prevention of access and other issues relating to the COVID-19 pandemic.

“The industry seeks to progress a court resolution of these matters quickly, and regardless of any decision around an appeal on the first test case,” ICA said in a statement this afternoon.

Insurers yesterday lost a test case to determine whether wordings referencing the Quarantine Act and subsequent amendments were valid in excluding COVID-19 business interruption claims

John Berrill, a Principal at Berrill & Watson insurance lawyers, says even before the case there were some policies without exclusions, and there are avenues to claim yet to be tested amid disputes with insurers.

“What the decision means is basically everything is still alive and on the table,” he told insuranceNEWS.com.au.

“One of the criticisms of the original test case was that it was so narrow. It didn’t deal with any of the other live issues, and those issues were always going to have to be ventilated.”

Berrill & Watson has been looking at the issues with Gordon Legal, which has called on businesses to contact the firm as part of a BI claims class action investigation. Mr Berrill says there is high likelihood a case will proceed.

“There are policies of all sorts of permutations and combinations,” he said. “Each person’s claim will be different, but there are common issues in relation to each of them.”

Similar issues are being looked at in the UK, where the Supreme Court is this week hearing an appeal on a test case brought by the Financial Conduct Authority. Class actions have also been flagged, including from the hospitality sector.

Under AFCA rules, a financial firm can apply for AFCA consent to begin legal proceedings by way of a test case, marking a different approach to the UK, where action has been initiated through the regulator.

As reported in a Breaking News this morning, QBE says a second test hearing could bring clarity on further issues. IAG also requested a trading halt on its shares to enable the insurer to consider the impact of the Court of Appeal decision.

Shine Lawyers says there are a “very large number” of policies that were issued with the Quarantine Act exclusion and the Court of Appeal decision is a major victory for businesses adversely affected by the pandemic.

“I expect this this decision will open the floodgates to a lot of claims and cost insurers a lot of money,” Commercial Disputes Practice Leader Michael Lalji said.