An Update On The Uncertainty Around Business Interruption Insurance Policies And Covid 19


The emergence of COVID-19 has changed many things, and when it comes to insurance one of the biggest impacts has been on business interruption insurance.

When the pandemic hit, a large number of business interruption insurance policies in the marketplace excluded pandemics by referencing the Quarantine Act 1908 in their policy wordings, which was replaced by the Biosecurity Act 2015.

Insurers argued that despite the reference to an out-of-date piece of legislation, the intent of the exclusion is clear, and declined to payout on a number of business interruption claims relating to the pandemic. However, some law firms and businesses have challenged this, resulting in a test court case to settle the matter.

In November 2020, the New South Wales Court of Appeal made a judgement that business interruption exclusions referring to the Quarantine Act are not valid in rejecting COVID-19 related claims. While insurers sought leave to appeal to the High Court of Australia, that request was denied.

However, despite some apparent clarity on policies that referred to the Quarantine Act 1908, the industry is still awaiting the outcome of a second test court case before many business interruption claims relating to COVID-19 can be finalised.

Insurers maintain that pandemics are not intended to be covered under most business interruption policies and that the premiums they charged were not priced with pandemic cover in mind. To test other issues related to pandemic coverage in business interruption policies such as policy wordings around the definition of disease and prevention of access, COVID-19 outbreak proximity, the impact of government mandates and other policy wording issues, insurers have brought a second test case.

The second test case, which began recently in the Federal Court of Australia, concluded recently, however the judgement in the matter has not yet been handed down. Time has already been set aside in November for a potential appeal hearing, with the case expected to be concluded by the end of 2021.

Gow-Gates clients who are considering lodging a COVID-19 related business interruption claim are encouraged to contact us. Insurers will respond to claims on a case-by-case basis, but if a claims involve one of the issues under consideration in the second test case, it is unlikely it will be settled initial after that case has concluded.

We recognise that the past few years have been incredibly difficult for the tourism industry and we are doing our best to assist our customers during these difficult times.

If you would like further information, please feel free to contact our travel team at Gow-Gates Insurance Brokers on 1300 165 116 or to discuss your circumstances.

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