Suncorp says a Federal Court ruling on a Victorian cafe’s business interruption disease exclusion wording has delivered a favourable outcome despite finding against the insurer on a specific question tested in the hearing.

“While the court rejected one interpretation of the exclusion clause put, and therefore answered the discrete question put to it as ‘no’, the court also rejected the insured’s narrow interpretation, and accepted Suncorp’s argument that the exclusion applied broadly for losses connected with COVID-19,” the company says.

Justices Anthony Besanko, Roger Derrington and Craig Colvin ruled on the matter in late December after a hearing was expedited.

Rockment, which owns the Vanilla Lounge cafe in the Melbourne suburb of Oakley, took action when a claim triggered by Victorian Government lockdowns was denied by Vero in May due to exclusion wordings citing the Federal Biosecurity Act.

Legal firm LGM Advisors, acting for the business, says the ruling has significantly improved Rockment’s position, and the insurer must now show causation between the human biosecurity emergency declared under the Biosecurity Act and the Victorian Government closure.

“This is a question for trial, as there will be factual issues that will need to be considered when applying the insuring clause which were outside the scope of the hearing,” Principal Lawyer Libby Lowe told insuranceNEWS.com.au.

“The ruling is very important and opens the door for many businesses seeking to make claims.”

The judgment says the Full Court was asked to identify the exclusion “causal factor”, and if it is sufficient to exclude cover if the claim is for losses directly or indirectly resulting from a disease “specified in a declaration of a human biosecurity emergency” under the Biosecurity Act.

“The question posed seeks to refine the issue to whether a connection between the claim and the existence of the listed human disease, which is specified in the declaration, is sufficient,” it says.

The court judgment says it’s not sufficient and the “question of causation” will depend on the situation.

“It should be emphasised that the negative answer to the question is in direct response to the question posed and the circumstances in which the court is asked to answer it,” the judges say.

“While it is the answer for which Rockment contended, the court has not accepted its construction. Conversely, whilst Vero contended that the question be answered ‘yes’, the construction accepted by the court is closer to its alternative construction than any proffered by Rockment.”

Suncorp’s solicitors King & Wood Mallesons say the matter will be remitted to a single judge to determine the remaining issues in the proceedings, including whether the exclusion precludes cover on the facts of the case.

The judgment is available here.