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Covid-19 Business Interruption (BI) Update – October 2022

On Friday 14 October 2022, the High Court of Australia (HCA) refused the applications by various policyholders for special leave to appeal from the decision of the Full Federal Court of Australia (FFC). This marks the end of the ICA test cases. Insurers will now determine claims for Covid-19 business interruption based on the principles set out in the Second ICA Test Case Appeal, the First ICA Test Case and the wording of the policy in question.
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By Catherine Osborne , 

Chief Claims Officer, Marsh Pacific

20/10/2022 · 3-minute read

On Friday 14 October 2022, the High Court of Australia refused the applications by policyholders for special leave to appeal a decision made by the Full Federal Court of Australia[1] on 21 February 2022 which:

a. found largely in favour of the insurers that, in 4 of the 5 claims, the insuring clauses did not cover COVID-19 business interruption losses (the Second Insurance Council of Australia (ICA) Test Case Appeal), and

b. dismissed Star Entertainment’s appeal from the Judgment of Allsop J of 5 August 2021 finding in favour of Chubb.

Only in the fifth claim did the Full Federal Court confirm on 21 February 2022 that cover had been triggered but found issues as to whether the policyholder could prove any relevant business interruption. The policyholder may bring the matter back to the Federal Court for determination if it is able to identify loss, which may be covered by the policy.

This marks the end of the ICA test cases. Insurers will now determine claims for COVID-19 business interruption based on the principles set out in the Second ICA Test Case Appeal, the First ICA Test Case and the wording of the policy in question. The First ICA Test Case was determined by the High Court on 25 June 2021, which denied the insurers’ application for special leave to appeal an earlier decision of the Supreme Court of New South Wales Court of Appeal, finding that insurers could not rely on references to the Quarantine Act “and subsequent amendments” in policies to exclude COVID-19 related claims. Please refer to our summary of the Second ICA Test case and the First ICA test case for more information.

The ICA has confirmed that insurers have taken steps to ensure claims are prioritised and finalised as quickly as possible. The ICA, the Australian Financial Complains Authority (AFCA) and participating insurers have also agreed that AFCA will follow the reasoning of the final judgments of the test cases when dealing with other similar complaints. Insurers including those not directly involved in the court proceedings, have also committed to applying the reasoning of the final judgments of the test cases in an efficient, transparent, and consistent way when assessing claims.

What could this mean for your business?

If you have suffered COVID-19 related business interruption losses, you should contact your broker to review your position and consider whether to make a claim. Please also take advice from a lawyer who specialises in the area. You should follow the steps we have previously outlined to confirm the extent of your losses and establish whether you are able to make a claim.

Whilst the Second ICA Test Case has been finally determined in favour of the insurers and the outcome will limit coverage for many business interruption claims arising from the COVID-19 pandemic, it is important to remember that claims outcomes may still be different depending upon the language used in a particular policy and the facts surrounding the actual business interruption loss suffered by the policyholder in question.

[1] Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2022] FCAFC 16 and LCA Marrickville Pty Limited v Swiss Re International SE [2022] FCAFC 17

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