The Insurance Council of New Zealand (ICNZ) says clear disease exclusions in business interruption policies suggest there is no need in that country for the type of legal test case that has been pursued in the UK, where the High Court this month ruled in favour of policyholders on some wordings.

“We have had no interest expressed by our members and nor do we believe a test court case is needed in New Zealand,” CEO Tim Grafton told insuranceNEWS.com.au.

“We understand that the vast majority of business interruption policies in New Zealand have explicit exclusions for infectious diseases and as such there would be very few instances where a finding similar to the UK High Court ruling would be applicable.”

An Australian test case, to be held in the NSW Court of Appeal on Friday, in relation to the use of an outdated statute isn’t applicable in New Zealand, Mr Grafton says.

Partner at law firm Chapman Tripp, John Knight, says many New Zealand policies have a disease exclusion, and more so in the latest renewals, but not all, and these are policies worth looking at following the UK decision.

Some corporates without disease exclusions are examining their extensions related to prevention of access and action of public authorities, with such responses causing losses more than the disease itself, he told insuranceNEWS.com.au.

“The impression I have is that insurers have generally said that there is no cover under these extensions, and some insureds are now looking at that declinature harder in light of the English test case,” he said. “It is too soon to predict whether any of these investigations will result in legal action.”

COVID-19 became publicly notifiable under New Zealand’s Health Act on January 30, meaning related losses would be excluded from cover under standard business interruption policies, Insurance & Financial Services Ombudsman Karen Stevens says.

“Therefore, because of this clear exclusion, it would be very unlikely that there could be a legal challenge,” Ms Stevens said. “Of course, it will always depend on the policy wording.”

The ombudsman has received 230 complaints and complaint inquiries related to COVID-19, including business interruption, but in most cases business interruption cover will not respond because there is no material damage.

Example wordings in standard clauses include “you are not insured for financial loss caused by, or in any way connected with, a notifiable infectious disease under the Health Act 1956 or any subsequent amendment or replacing Act unless covered under automatic benefit 2.5 (public authority action)".

The UK court case included disputes over policies which provide cover for diseases within certain area limits, such as 25 miles, 1 mile or the “vicinity”, finding in certain cases cover was available for COVID-19 pandemic impacts.

Cover related to prevention of access and public authority actions was viewed more restrictively by the court, depending on wordings and the nature of the business.

The Australian case on Friday centres on whether disease exclusions that reference the Quarantine Act 1908 and subsequent amendments are valid, given that law was replaced by the Biosecurity Act 2015.