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BI test case listed for directions hearing

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Business interruption test case proceedings have been listed for a directions hearing at the NSW Supreme Court on August 28.

The Insurance Council of Australia (ICA) last week commenced proceedings saying it will “test the application of certain infectious diseases exclusions in business interruption policies”.

As has previously reported, some Australian insurers’ policies still include exclusions referring to the repealed Quarantine Act 1908, which was replaced by the Biosecurity Act 2015. As a result, some claimants hope the exclusions will not apply to COVID-19 claims.

The test case consists of two separate small business claims that were lodged with the Australian Financial Complaints Authority (AFCA) as part of its dispute resolution process. The claims were with Hollard and HDI Global Specialty.

A spokesman for the court says the matter is listed as HDI Global Specialty SE v Wonkana No 3 Pty Limited trading as Austin Tourist Park. The Hollard Insurance Company is listed as the second plaintiff.

ICA thanked the insurers for offering claims “to assist the whole insurance industry in reaching a better understanding of how the infectious disease exclusions in policy documents respond to the unique circumstances of the COVID-19 pandemic”.

The insurers’ legal costs for the hearing will be paid by ICA.

The council, which will be represented by Bret Walker SC, instructed by Clyde & Co, says it “will not pre-empt legal arguments that will be put forward, and encourages all parties and interested persons to allow the legal process to take place unencumbered by speculation or commentary”.

AFCA will use the test case outcomes to determine complaints related to business interruption claims and infectious disease exclusions.

“ICA believes this test case is an important step towards providing greater clarity to insurers and small business customers in the treatment of pandemic-related claims,” CEO Rob Whelan said.

“The industry wishes to have the case heard as quickly as possible, given the challenging times being experienced by the small business sector because of COVID-19, the past season of natural disasters and the recession.

“Most insurers have never contemplated coverage for pandemics in their policies, and did not price pandemic risks into premiums.

“They believe pandemic-related exclusions are appropriate, but wish to provide greater clarity through engaging a superior court process.”

Hollard Insurance founder and CEO Richard Enthoven says his company “remains of the clear view that business interruption coverages do not cover pandemics”.

“However, we volunteered to be part of the test case process so that the court system can clarify for our policyholders, Hollard and the industry how to handle this important issue.”

HDI Chief Marketing Officer Richard Taylor says the company takes the matter very seriously.

“We are pleased to be able to make a positive contribution through our involvement in the agreed test case process,” he said.