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ICA reviewing Federal Court BI test case decision

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The Insurance Council of Australia is reviewing a Federal Court business interruption test case judgment delivered on Friday that went largely in favour of insurers as appeals are considered.

“We welcome [the] judgment of the Federal Court, which provides an important step towards finalising these matters,” ICA CEO Andrew Hall said.

ICA says it will provide further comment this week after examining the reasons delivered by the court.

The ruling handed down by Justice Jayne Jagot, and reported by in a Breaking News late Friday, went in favour of insurers in all but one of the test case claims. On the matter where cover may respond, the judgment found there were still significant issues.

The ICA second test case consisted of nine small business claims lodged with the Australian Financial Complaints Authority as part of its dispute resolution process. Insurers involved are Allianz, Chubb, Guild Insurance, IAG and Swiss Re. Another case, involving QBE and centring on Victorian property law, was later rolled into the proceedings.

The hearings held over eight days last month considered whether COVID-19 was covered under hybrid, infectious disease, prevention of access and catastrophe clauses.

“Other than in one case [IAG/Meridian Travel] I have concluded that the insuring clauses do not apply in the circumstances of each case,” Justice Jagot said.

But the judgment concluded Section 61A of the Property Law Act does not apply to Federal legislation and rejected insurer arguments that they could rely on it to replace references to the Quarantine Act with references to the Biosecurity Act.

Justice Jagot has granted all parties leave to appeal, with dates for a Full Court hearing set aside for November 8-16 in an expedited process.

The judgment is detailed, and a comprehensive analysis is required to assess the impact, which will vary by insurer, IAG said this morning.

ICA has confirmed the industry will again meet the costs of policyholders in any appeals process and that the final outcomes will be applied broadly.

“Insurers, including those not directly involved in the court proceedings, are committed to applying the principles of the courts’ final ruling consistently and efficiently to all business interruption claims,” Mr Hall said.

Justice Jagot said the appeal for The Star Entertainment Group versus Chubb and other insurers would be heard at the same time as test case issues next month. The Star has already filed an appeal against a decision delivered by Chief Justice James Allsop in favour of insurers.

Berrill & Watson Principal John Berrill, representing policyholders in class actions against QBE and Lloyd’s, says the ICA process involving two test cases has taken too long and is yet to deliver clarity.

“Regardless of [Friday’s] judgment, a final decision in this test case remains a long way off and, even then, businesses will still have to prove they have a valid claim to secure a payment,” Mr Berrill said.

ICA and the National Insurance Brokers Association (NIBA) said last week that small businesses can lodge a claim at any time and insurers will respond on a case-by-case basis. In some cases claims may be fast-tracked.

A list providing a general outline of documents and information required has been prepared to help make the process more efficient.