Court action is looming over outdated pandemic exclusions contained within Australian business insurance policies.

As insuranceNEWS.com.au reported last week, many business interruption exclusions still refer to “quarantinable diseases” under the Quarantine Act 1908, which was repealed and replaced by the Biosecurity Act 2015.

The issue is believed to affect most IAG and Allianz policies, and some QBE policies.

Industry insiders have warned that the issue is heading for a lengthy and expensive legal battle that will probably end in the High Court.

Insurers argue that the intent of the exclusion is clear, and insuranceNEWS.com.au understands that legal advice given to the Insurance Council of Australia suggests the exclusions will hold firm.

But some law firms disagree.

Clayton Utz believes policies which have broad infectious diseases cover, with exclusions that refer only to the Quarantine Act, should respond.

“Our view is that it is not correct to interpret the exclusion as applying to COVID-19,” Special Counsel Chris Erfurt said.

“For one thing, the Quarantine Act was repealed nearly five years ago, so it does not apply to COVID-19.”

See Analysis.