The Insurance Council of Australia (ICA) is urging small businesses to submit a claim if they believe they have business interruption (BI) cover for COVID-19 lockdowns, following Friday’s test case defeat in the High Court.

However, ICA warns claims may not be finalised until the conclusion of the second test case, which is scheduled for a hearing in September.

As reported by insuranceNEWS.com.au in a Breaking News bulletin on Friday, the High Court denied ICA’s application to appeal last year’s NSW Court of Appeal ruling that insurers can’t rely on exclusion wordings citing the Quarantine Act and subsequent amendments.

“Finalisation of many claims may still not take place until further clarity is provided by a second test case, underway now in the Federal Court,” ICA says in a statement.

“This second test case will determine the meaning of policy wordings around disease definition, COVID outbreak proximity, the impact of government mandates, and other policy wording matters.

“However, this does not prevent policyholders from lodging a claim now.”

ICA criticised “some class action law firms” for suggesting Friday’s decision only has implications for customers of the two insurers directly involved in the first test case – Hollard and HDI – and that customers of other insurers will need to pursue their own legal remedies.

“Insurance Council members have previously committed to applying the rulings of the courts in the BI test cases in a consistent way when assessing all claims.”

ICA says if a claim is denied by an insurer, the Australian Financial Complaints Authority can make binding decisions on claims up to $1.085 million free of charge for policyholders, “in contrast to the substantial fees sought by class action funders and lawyers”.

“It is the position of the ICA that policyholders affected by COVID shutdowns are entitled to lodge a claim with their broker or insurer against their business interruption cover,” CEO Andrew Hall said.

“As we are also nearing the end of the financial year, lodging a claim in this matter can be complex and requires gathering evidence – that’s why policyholders should start that process now.

“While many claims will have to wait until the outcome of the second test case, lodging a claim now means that once that outcome is known a resolution can take place quickly, providing certainty for policyholders.”

Documents filed to the High Court last year said Quarantine Act issues affected more than 250,000 business interruption policies and potential claims were estimated at $10 billion.

Gordon Legal Partner Andrew Grech says insurers have been “taking every legal option” to slow down the process and avoid settling claims related to BI claims. He says that approach is likely to continue.

“After months of preparation we will commence a class action against two major insurers imminently,” he said on Friday.

“Regrettably it is now clear that the only way to force insurers to do the right thing by their customers in the shortest time possible is through the strength in numbers and collective power of a class action.”