Business Interruption Insurance Update

As a big chunk of Australian businesses are back in lockdown this week, I thought I would post an update about Business Interruption Insurance and the attempts by the insurance industry to deny claims under these policies.

Issue 1

Insurance companies were / are denying claims under Business Interruption Insurance policies on the basis that the policy excluded claims related to pandemics such as Covid. 

But a number of these policies referred to a repealed Quarantine Act of 1908, rather than the current legislation, the Biosecurity Act.  A NSW Court of Appeal decided in November 2020 that relying on repealed legislation was not a valid exclusion.

As you would expect insurers did not like this outcome so sought leave to appeal to the High Court to overturn this decision.  This leave application was rejected in June 2021, so the decision on the NSW Court of Appeal stands. 

The outcome of this is that prima facie, an insurer under a business interruption insurance policy which sought to exclude the impact of pandemics under the repealed Quarantine Act of 1908 is unable to do so.

Issue 2

But insurers are still fighting this.  They are now running a new test case in the Federal Court to examine other matters in the fine print.  Questions around policy wordings around disease definition, COVID outbreak proximity, the impact of government mandates, and other policy wording matters.  

It is expected that the outcome of this new test case will not be known till at least November 2021.

Until this new test case is dealt with by the courts, insurers will not currently finalise any claim under a business interruption insurance policy which referred to the Quarantine Act.

What should you do if you have Business interruption insurance

My recommendation is to check your business interruption insurance policy to see if it is trying to exclude pandemic cover under the Quarantine Act of 1908.

If it does, then talk to your insurer or your broker about what you would need to get ready to make an actual claim.  Start now collating evidence around the loss you have experienced, or are still experiencing.  That way if the courts decide in business favour, you are ready to lodge a claim.

If you want a confidential discussion on your business situation, contact me below

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Wayne Wanders, A Real CFO

wayne@aRealCFO.com.au