Australian BI Case Heads to Court of Appeal

A test case to define insurers’ liability for business interruption claims in Australia is to be heard in the New South Wales Court of Appeal.

The case was launched by the Insurance Council of Australia (ICA) to examine the application of certain infectious diseases exclusions in business interruption policies in an effort to deliver clarity on the role of the insurance industry.

On Friday, NSW Supreme Court Justice David Hammerschlag granted a joint motion by legal counsels to move the case to the Court of Appeal. The hearing is expected to begin on 2 October in a move welcomed the ICA.

The test case consists of two separate small business claims that were lodged with the Australian Financial Complaints Authority (AFCA) as part of its dispute resolution process. It is understood the AFCA will use the outcomes of the test case in determining complaints arising in respect of business interruption claims with the infectious disease exclusion.

When launching the case, Rob Whelan, CEO, Insurance Council of Australia said: “The Insurance Council of Australia has prepared this test case on behalf of the general insurance industry.

“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.”

Speaking today ICA CEO Andrew Hall said: “ICA legal representatives and the plaintiffs’ solicitors provided a joint motion that the combined test case be moved to the NSW Court of Appeal and expedited.

“After reviewing the pleadings and the joint motion, Justice Hammerschlag determined the case was of sufficient importance that it should be moved. The ICA is pleased the case will be heard by the Court of Appeal on an expedited basis.

“The pandemic and resulting uncertainty have had a devastating impact on Australia, so we are pleased the test case hearing is progressing as quickly as possible, and a judgment can be delivered that provides greater clarity to customers, insurers and regulators in the treatment of pandemic-related claims.”

He added: “In most cases, pandemic exclusions are a threshold issue in Australia given that most insurers have never contemplated coverage for pandemics, have not priced the risk or collected premiums for this risk. Globally, insurers generally regard pandemics as uninsurable risks.”

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