The Full Court has this morning started hearing appeals related to business interruption claims triggered by the COVID-19 pandemic after initial Federal Court decisions mostly favoured insurers.

Justices Mark Moshinsky, Roger Derrington and Craig Colvin are hearing five matters arising from the Insurance Council of Australia (ICA) second test case as well as an appeal from The Star Entertainment Group against Chubb and other insurers.

The hearings this morning focused on The Star case, which Federal Court Chief Justice James Allsop decided in favour of the insurers in a judgment handed down in August.

John Sheahan QC, appearing for The Star, argued against rejecting cover on the grounds of inconsistences between the approach to infectious diseases across different memorandum clause wordings.

“What’s, in our respectful submission, almost a path to madness is to try and make each of these things entirely consistent with each of the others,” he said.

Mr Sheahan says it’s “perfectly reasonable” that cover may be provided under a civil authority extension, but not elsewhere in a clause with a different focus.

“Precisely because the public policy response to a disease listed under the Biosecurity Act might be much more severe, it is taken out of the operation of a clause which is subject to very tight sub limits and temporal limits and left available if it rises to the level of a catastrophe,” he said.

Mr Sheahan also pointed out differences between the more complex policy for The Star compared to a standard form policy using some similar wording that is part of a matter involving Swiss Re in the ICA test case.

The ICA test case appeals involve QBE and Educational World Travel, Swiss Re and LCA Marrickville, IAG and Meridian Travel, IAG and The Taphouse Townsville and Chubb and Market Foods.

ICA has said policyholders have filed appeals and insurers have filed cross-appeals and notices of contention. Federal Court Justice Jayne Jagot delivered her decision on a total of 10 cases last month.

Legal firm Herbert Smith Freehills has warned the ICA test case may not be finalised until this time next year given leave to appeal is likely to be sought from the High Court, no matter which side loses the current hearing.

Partner Mark Darwin and Senior Associate Travis Gooding say in an article on the firm’s website that the Federal Court outcome in favour of insurers was essentially due to one legal and one factual finding,

On the key legal issue, Justice Jagot found it would be incongruent to read prevention of access extensions as being applicable to actions in response to diseases, where the policy contains another clause specifically extending cover for diseases.

The Full Court has set aside this week and next Monday and Tuesday to hear the appeals.