ICA prepares pandemic BI test case

The Insurance Council of Australia (ICA) and the Australian Financial Complaints Authority (AFCA) have agreed to file a test case considering 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.

On behalf of all insurers who offer commercial products, the ICA will seek leave to have the test case heard as an expedited matter.

The outcomes of the test case will be used by AFCA in determining relevant complaints arising in respect of business interruption claims. The legal costs of the test case will be funded by the ICA.

According to Rob Whelan, CEO, Insurance Council of Australia: “A decision from a superior court will assist insurers, AFCA and customers in developing a better understanding of how exclusions in policy documents respond to the unique circumstances of the COVID-19 pandemic.

“Insurers believe the intention of pandemic and communicable human disease exclusions are clear. However, a judicial determination will provide insureds and AFCA with greater legal certainty on this issue.” 

John Price, lead Ombudsman Insurance, AFCA, added: ”The outcome of the case will provide some clarity for all stakeholders in particular small business and insurers.”