Outcome will be used to determine complaints arising from COVID-19 related business interruption claims

The Insurance Council of Australia (ICA) and the Australian Financial Complaints Authority (AFCA) have filed a test case in the NSW Supreme Court to consider the application of infectious diseases cover in business interruption policies. 

The primary purpose of the test case is to seek a decision from a superior court on whether references to a quarantinable disease under the Quarantine Act 1908 should be construed as a reference to a listed human disease under the Biosecurity Act 2015 in various policies issued to small businesses containing business interruption cover.

The outcomes of the test case will be used by AFCA in determining relevant complaints arising from COVID-related business interruption claims. The legal costs of the test case are being funded by the ICA.

According to Rob Whelan, CEO, Insurance Council of Australia: “The ICA believes this test case is an important step towards providing greater clarity to insurers and small business customers in the treatment of pandemic-related claims.”

“The industry wishes to have the case heard as quickly as possible, given the challenging times being experienced by the small business sector because of COVID-19, the past season of natural disasters and the recession.”

“Most insurers have never contemplated coverage for pandemics in their policies, and did not price pandemic risks into premiums. They believe pandemic-related exclusions are appropriate, but wish to provide greater clarity through engaging a superior court process.”

According to Richard Enthoven, CEO and founder, The Hollard Insurance Company: “We remain of the clear view that business interruption coverages do not cover pandemics. However, we volunteered to be part of the test case process so that the court system can clarify for our policyholders, Hollard and the industry how to handle this important issue.”

Richard Taylor, CMO, HDI Global Specialty SE, added: “As a global and prominent insurer in Australia, we take this matter very seriously and we are pleased to be able to make a positive contribution through our involvement in the agreed test case process.”