Business interruption insurance. Are you covered?

Dec 7, 2020

The Covid-19 restrictions have had devastating effects on many businesses across Australia.

Businesses may turn to their business interruption insurance to consider whether they are covered against the interruption caused by Covid-19.

Like any claim under an insurance policy, the outcome of a claim will depend on the wording of the policy and any relevant exclusion clauses.

The recent Covid-19 test case, Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296, challenged an insurer’s reliance on outdated exclusion clauses to reject a claim for loss arising from the Covid-19 outbreak.

The proceeding, funded by the Insurance Counsel of Australia, sought declarations that insurance claims for loss caused by the COVID-19 outbreak was excluded from coverage. The NSW Court of Appeal unanimously dismissed the proceeding.

An insurer attempted to avoid honouring claims made by affected business by relying on an exclusion clause which excludes “diseases declared to be quarantinable diseases under the Quarantine Act 1908 (Cth) and subsequent amendments.”

The Quarantine Act 1908 (Cth) was repealed and replaced by the Biosecurity Act 2015 (Cth) as of 16 July 2016.

The insurers argued that the exclusion clause ought to be understood as extending to “diseases determined to be listed human diseases under the Biosecurity Act 2015 (Cth)”, because the Biosecurity Act was a “subsequent amendment” to the Quarantine Act or alternatively because the references to the Quarantine Act were an obvious mistake and it was clear that the parties had intended to refer to any replacement Act.

Thankfully for many businesses, the Court of Appeal rejected these arguments and instead found that the policy wording was not ambiguous and that “subsequent amendments” did not extend to any acts that replaced the Quarantine Act 1908.

Exclusion clauses referring to “the Quarantine Act 1908 and subsequent amendments” therefore cannot be relied upon by insurers to reject claims for loss suffered as result of business interruption caused by the Covid-19.

Although it is anticipated that the Insurance Counsel of Australia may seek special leave to appeal to the High Court, it is imperative that any claims that have been denied due to a similar or identical exclusion clauses be reviewed following the decision.

Similarly, any businesses that have not yet made a claim should seek advice as to whether the wording of their policy will allow them to make a claim to recover their loss.

If you need advice on your business’s insurance policies, our team is willing and able to assist.