Covid-19 Business Interruption test case: An update for NIBA members

In August 2020, the Insurance Council of Australia supported the commencement of a test case in the NSW Supreme Court to consider the application of Quarantine Act type exclusions in business interruption policies of the insurers HD Global Specialty SE(HDI) and The Hollard Insurance Company Pty Ltd (Hollard) as they applied to COVID-19. The NSW Court of Appeal has unanimously decided against the insurers, finding that these Quarantine type exclusions do not apply to COVID-19.

The parties are currently considering the decision and have until 16 December 2020 to seek special leave to appeal to the High Court of Australia. Insurers that have only denied a claim on the basis of such an exclusion will now have to reconsider their prior position.

Typically, insurance brokers should identify the approach now being taken by insurers with equivalent provisions and advise clients affected by the decision and determine how they wish to proceed. It is important to note that insurers may still be able to rely on other provisions to deny a claim and this test case may not affect such rights. The Insurance Council of Australia (ICA)has advised that it is talking with insurers, the Australian Financial Complaints Authority (AFCA) and other stakeholders about a further test case, which might explore other grounds on which insurers might deny claims beyond these exclusions e.g proximity, prevention of access and other matters relating to COVID-19.

NIBA’s legal Adviser, Mark Radford, has prepared an update for members that explains the case and the judgement in more detail