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Appeal judges adjourn to consider business interruption decision

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The NSW Court of Appeal Full Bench has adjourned to consider its decision following a test case hearing on business interruption policy exclusions that cite repealed legislation.

Senior Counsel Bret Walker told the court on Friday that insurers’ intentions around disease exclusions were clear in their references to the Quarantine Act 1908 “and subsequent amendments”.

The Quarantine Act was replaced in 2015 by the Biosecurity Act, leading to policyholders’ arguments that COVID-19 disruption claims are covered because the exclusions refer to legislation that no longer exists.

Mr Walker said “subsequent amendments” clearly show policies refer to “a statute which it was contemplated might change”, and otherwise the wording would be a tautology as all amendments are subsequent.

Insurers expected legislation would exist that would allow policies to include a “sensible restriction”, even if the specifically named Quarantine Act 1908 was no longer in place, he told the court.

“We should be able to ask rhetorically, and with success, ‘what’s in a name'?”.

The test case, initiated by the Insurance Council of Australia (ICA) in consultation with the Australian Financial Complaints Authority (AFCA), consists of two separate small business claims lodged with AFCA as part of its dispute resolution process.

The first involves insurance provided by HDI Global to the Austin Tourist Park in Tamworth, NSW. The second is for business cover provided by Hollard for the Thrive, Health and Nutrition shop in the Melbourne suburb of Maribyrnong.

QC John Sheahan, for the policyholders, said the product was aimed at small business clients, that it was presented in everyday language and it should be taken that the policy “means what it says”.

“The court should hesitate before departing from the plain meaning of the language that has been used,” he said. “These are documents meant to be able to be understood by the reader.”

Mr Sheahan said the policy exclusion that encompasses declared diseases listed under the previous Quarantine Act is unambiguous, and rejected tautology arguments on the “subsequent amendments” phrasing.

Viewing the matter from the perspective of what the insurers intended or sought to achieve was an “impermissible” frame of reference, he told the court.

“The correct frame of reference is, what would reasonable persons in the position of the parties take the language to convey?”

Questions were also raised over whether insurers intended the policies to cover diseases already declared at the time of policy inception, or whether they included diseases named during the course of the covered period.

The case is being heard by NSW Chief Justice Tom Bathurst, Court of Appeal President Andrew Bell and Justices Anthony Meagher, David Hammerschlag and Michael Ball.

ICA CEO Andrew Hall says insurers look forward to a “swift determination” following the one-day hearing, which was expedited straight to the Court of Appeal.

“The case is an important step towards providing greater clarity to customers, insurers and regulators in the treatment of pandemic-related claims,” he said.