The Full Federal Court of Australia has delivered judgement on the second test case appeals with four of the five Judges finding in favour of the insurers.
Background — the first business interruption test case
The first business interruption test case occurred in 2020. In this case, some business interruption policies referred to the “Quarantine Act of 1908”. The Quarantine Act was repealed in 2016 and replaced by the Biosecurity Act. Policies that still included an exclusion that referenced the Quarantine Act were determined by the High Court to be ineffective and ruled in favour of the policy holders.
First case key points
- Insurers could not rely on the exclusion to deny liability
- Businesses may be able to claim under their policy for COVID-related losses.
The second case
The second business interruption test case was undertaken in the Federal Court in September 2021. This case sought to resolve further interpretations of business interruption policies to determine if there would be cover for COVID-19 losses. Justice Jagot heard arguments from ten separate parties and determined that except for one (Meridian Travel v Insurance Australia) the insuring clauses within the policy did not apply as Government orders were not due to the outbreak being on the insured’s actual premises.
Second case key points
- Policyholders were found not to have any claim to business interruption coverage for COVID-19 related losses under the terms of their policies
- The question of coverage was left open in the fifth case.
Next steps — possible appeal to the High Court
On 21 March 2022, applications for special leave to appeal to the High Court were filed by two policy holders. The parties will need to await the decision of the High Court which could take up to three months. If the High Court denies the appeal, then the legal dispute will come to an end leaving many Australian businesses with no further avenue to claim for Covid business interruption losses.
We will be closely monitoring this situation and provide further updates as they arise.
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