A good win for the insured – Review your policy!
You may recall at the beginning of COVID-19, we released an article on outdated business interruption policies which referred to the Quarantine Act 1908 and the challenge for insurers to exclude cover for losses stemming from human infectious and contagious diseases such as Corona Virus.
To refresh your memory, the Quarantine Act was replaced by the Biosecurity Act 2015. There were some insurers that failed to update their policies at the time. As a result, these policies referred to a piece of legislation that was no longer in existence. These policies would face certain difficulty in relying on an exclusion clause that cited repealed legislation, whereas policies that were updated to include a reference to the Biosecurity Act, would successfully exclude cover for coronavirus. The reason being that the defined list of human diseases, which is included in the Biosecurity Act, was updated to include COVID in February 2020.
After a series of complaints in the Australian Financial Complaints Authority (AFCA), the issue was referred to the NSW Court of Appeal for further guidance and determination. On 20 November 2020, the NSW Court Appeal held that policies that referred to the Quarantine Act could not rely on that particular exclusion, meaning insurers could not exclude cover for losses associated with coronavirus.
That is not to say if your policy contains a reference to the Quarantine Act, that you are certainly covered. It will also depend on the construction of other wording in the policy.
Shortly after the decision of the NSW Court of Appeal, the insurers filed an application for special leave to appeal the decision in the High Court of Australia.
On Friday, 25 June 2021, the High Court rejected the leave application which delivered some positive news after some dark times for businesses all over Australia. This is great win for the insured, however, it may have significant financial repercussions on the insurance industry.
There is also a second test case before the Court which is seeking clarification of a number of other questions regarding the wordings of different policies and how they should be interpreted. These include issues such as, whether businesses need an actual confirmed case of COVID-19 within close proximity to their business or whether losses can be more broadly linked to government-ordered lockdowns. This will not likely be determined until late 2021.
Review Your Policy
We encourage you to review your policy and consider whether you are covered for business interruption losses caused by the coronavirus pandemic, particularly if your policy pre-dates March 2020.
If you would like assistance with reviewing your policy or understanding your rights, please do not hesitate to contact Marcus Carbone or Bailey Neate on (02) 9523 5535.