On Wednesday 18 November the NSW Court of Appeal handed down a unanimous decision in a case launched by the Insurance Council of Australia concerning the application of Business Interruption (BI) claims related to two test cases, where business operations were affected by COVID-19 and their policy coverage denied.
The Court ruled that COVID-19 is not a disease “declared to be a quarantinable disease under the Quarantine Act 1908 and subsequent amendments” and accordingly, “was not excluded from the disease benefit clauses”.
This ruling means that policies containing an exclusion that referenced the Quarantine Act could not limit or exclude otherwise valid claims. As such, policies that only included reference to this specific Act should now allow claims to proceed.
While this decision is a welcome one for policyholders as it removes a major hurdle to proceeding with claims, there are some additional considerations that must be taken into account which include:
- The Court’s decision may be appealed and insurers have up to 28 days to make such application to the High Court;
- Policies also contain other triggers that need to be met as to determine a valid claim. These include the location and/or proximity of a business premises to an outbreak of COVID-19;
- BI claims are subject to adjustment to determine if turnover has reduced and/or business expense savings have been made, i.e. there needs to be quantifiable loss;
- The calculation of the above point – considering both Federal and State Government incentives – to boost cashflow and keep as many businesses operating as possible.
As each claims matter will be specific to your individual circumstances, we recommend that clients contact us to discuss your policy coverage details and next steps in the claims process.