Insurers on hook for pandemic losses after NSW Supreme Court ruling
Thousands of businesses affected by COVID-19 may be entitled to insurance payments under business interruption policies after the NSW Supreme Court of Appeal found pandemic exclusions were not valid.
The test case was brought by the Insurance Council of Australia to determine if pandemic exclusions that referenced the Quarantine Act, that was replaced by the Biosecurity Act in 2015, could be used to reject claims.
Many business interruption policies, including those provided by Suncorp, IAG and QBE, reference the expired Quarantine Act, but relied on the argument that “quarantinable diseases” exclusions were relevant for the pandemic.
However, the court found COVID-19 was not declared a quarantinable disease under the act referenced in current policies, and therefore insurers cannot reject these claims, meaning the industry could be on the hook for hundreds of millions of dollars in payments.
“The policies provide for the exclusion from cover of particular diseases by reference to a repealed Act,” the court found.
Insurance lawyer John Berrill said the judgement was a “win” for thousands of small- and medium-sized businesses that have lost income as a result of lockdown restrictions this year.
“The sorts of businesses that do have business interruption and need it are public-facing, so cafes, restaurants, gymnasiums, dance studios,” Mr Berrill said.
The insurance body had previously been confident the court would rule in the insurance industry’s favour, but said on Wednesday it would consider appealing the judgement.
“The Insurance Council of Australia notes today’s judgment by the New South Wales Court of Appeal,” it said. “The ICA, in consultation with its members and legal representatives, will urgently review the determination and specifically the grounds on which it could seek special leave to appeal against the decision to the High Court of Australia.”
Mr Berrill said business owners would now need to review their policies and prove cases individually. “This is just the start of a long journey.”
“But what this does mean is the knockout blow the insurers were looking for has been itself knocked out of the park.”
General insurer Suncorp said on Monday it was 90 per cent certain the court would rule in the insurance industry’s favour, but increased its provision for pandemic claims by $125 million regardless.
Charlotte is a reporter for The Age.
Most Viewed in Business
Source: Thanks smh.com