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ICA considers next legal steps on BI pandemic cover

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The Insurance Council of Australia (ICA) is considering legal action on two fronts following the NSW Court of Appeal test case decision last week that found in favour of policyholders on business interruption pandemic exclusions.

ICA is consulting on both an appeal to the High Court on last week’s decision, and is also looking at a second case that would look at other issues that could exclude claims related to COVID-19.

The NSW Court of Appeal ruled that exclusions citing the Quarantine Act 1908 “and subsequent amendments” could not be read as also including the current Biosecurity Act 2015. As a result, insurers cannot rely on the clause to exclude claims.

Insurers have 28 days from the decision to lodge an appeal, with any High Court decision then not likely until well into next year.

ICA is also talking with the Australian Financial Complaints Authority, insurers and others on another test case that would look at issues such as proximity and prevention of access.

“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,” it said last week.

“The Insurance Council will continue to work with all stakeholders and government to provide clarity for all parties and the industry. It will provide an update on these matters as soon as they are settled in coming weeks”

National Insurance Brokers Association (NIBA) CEO Dallas Booth says the ruling has provided clarity on the quarantine wordings issue.

“Other triggers are there, and this ruling does not necessarily mean that claims will be paid,” he told insuranceNEWS.com.au. “However, if a claim was denied purely on that basis, then that claim can now proceed.”

Herbert Smith Freehills Partner Mark Darwin says claims citing the old legislation have cleared a first hurdle following the court decision against insurers, who argued they clearly meant to include the Biosecurity Act, even if they hadn’t known it had replaced the previous law.

“When you read the reasoning of the Court of Appeal, it is a real master class in contractual interpretation,” he said.

“What it really says is, ‘Look, you might have intended something, but it is not our job to work out what you’ve intended, or what you would have done if you’d known more’.”

See ANALYSIS.