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Insurers, brokers told to ready for BI test case result

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The Australian Securities and Investments Commission (ASIC) has written to insurance and broking firms advising they should be ready to respond to the outcome of the NSW Court of Appeal business interruption test case.

Deputy Chairman Karen Chester says in a letter to directors that plans should include how to communicate with policyholders if the judgement comes down in favour of policyholders.

“General insurers should also provide appropriate information to insurance brokers to pass on to small business policyholders,” Ms Chester says.

The case brought by the Insurance Council of Australia, with support from the Australian Financial Complaints Authority, was heard on October 2 to determine whether disease exclusions referring to the Quarantine Act are valid for COVID-19 disruptions, given the law has been replaced by the Biosecurity Act.

The Full Bench is still considering its decision on the matter, which was fast-tracked to the NSW appeal court. Any appeal of that ruling would go to the High Court.

ASIC says it has also been monitoring international developments including the recent test case ruling in the UK High Court, which found claims should be paid in some cases.

In Australia, ASIC has collected and reviewed 392 policy wordings issued by insurers to small businesses employing less than 100 people and says despite exclusions it has identified a range of wordings that may respond to losses arising from COVID-19.

Policies may respond because they do not include a pandemic exclusion or contain an exclusion that applies only to “infectious disease” coverage clauses and not to other clauses in the policy such as “prevention of access” or “closure by authority”, ASIC says.

It says insurers, coverholders and brokers should ensure information they provide about coverage before claims are lodged is clear, accurate, balanced, and does not, whether deliberately or inadvertently, mislead or deceive.