NSW 5-0 decision in Court of Appeal Gives Lift to Business Interruption Claims in Melbourne
While many Melbourne businesses face closure and financial loss due to the COVID-19 pandemic, one area of particular concern is that of business Interruption claims being rejected due to the replaced Quarantine Act of 1908. Insurers have been rejecting claims noting that business interruption policies did not have the correct phrasing, as the Quarantine Act had since been replaced by the Biosecurity Act.
The Biosecurity Act
Under the Quarantine Act in order to successfully process a claim the offending disease must fall under the category of “quarantinable disease.” However, since the Biosecurity Act which now lists a similar category of “listed human disease” replaced the Quarantine Act, insurers claim that Business Interruption Loss claims are no longer valid since the Biosecurity Act “did not provide for declarations of quarantinable diseases by the Governor General.”
However, in a NSW Court of Appeal case the court rejected the insurance industry’s argument that policies do not cover COVID-19 related financial losses in a 5-0 decision. They deemed that COVID-19 claims for Business Interruption losses falls under the Biosecurity verbiage of “listed human disease.”
The 5-0 Appeal Court decision specifically referred to a case involving insurer HDI and one of their covered businesses. Though, as this ruling moves forward it is expected that tens of thousands of businesses who either have not filed COVID-19 business interruption loss claims, or those who had been previously rejected will be filing new claims.
What happens next?
As noted by Insurance Lawyer John Berrill in the Financial Review “Businesses will still need to prove that the COVID-19 pandemic caused business interruption losses”, which is something that may cause additional challenges between businesses and their insurers. However some insurers, including Suncorp, have begun to put aside additional funds to cover these business interruption losses. Suncorp, in their effort put aside an additional $125-million.
While this may take a toll on insurers, it is also thought that the original financial concern among the insurance industry had been overstated and not ruin insurance companies as many insurers claimed.