High Court to hear arguments for COVID-19 insurance test case

The High Court will hear oral arguments from the Insurance Council of Australia on its bid to appeal its defeat in a landmark business interruption test case.

Businesses interrupted by the pandemic are looking closely at their insurance policies. Picture: Naomi Jellicoe

The High Court will hear oral arguments from the Insurance Council of Australia on its application to seek special leave to appeal its defeat in a landmark business interruption test case to settle the uncertainty surrounding the extent to which policyholders can make COVID-19 related claims.

It comes after the NSW Court of Appeal in November found that businesses with policies that referred to the defunct Quarantine Act were not excluded from business interruption insurance coverage, opening the door for policyholders to make claims relating to the damage caused by the COVID-19 pandemic.

In a statement, the ICA – which represents Australian insurers – said it anticipated arguments will be heard on a date to be determined in May or June.

“The insurance industry remains of the view that pandemics were not contemplated for coverage under most business interruption policies and that the Quarantine Act exclusion excludes COVID-19 related claims,” the ICA said.

The ICA said a separate, second test case in the Federal Court has been expedited due to the need to create certainty for insurers and policy holders, with the trial to take place in the first half of September and any appeals be dealt with by the Full Court of the Federal Court in the first week of November.

“There are other issues concerning the interpretation of business interruption policies that also need to be resolved to determine whether policyholders will ultimately be covered, which is why a second test case has been commenced in the Federal Court of Australia,” the ICA said.

“The second test case will determine the meaning of policy wordings in relation to the definition of a disease, proximity of an outbreak to a business, and prevention of access to premises due to a government mandate, as well as policies that contain a hybrid of these type of wordings.”

Insurance Council CEO Andrew Hall said the group’s basis for its appeal was “compelling”.

“Today’s decision is a welcome next step in this important process and the insurance industry looks forward to presenting what we believe is a compelling case based on a solid legal framework,” he said.

“Given this issue relates to a policy exclusion for which insurers have not been collecting premiums, seeking reinsurance or collecting reserves, there is a strong public interest benefit in the High Court hearing oral arguments.

“Once final rulings have been obtained from the courts, insurers are committed to applying the relevant principles in an efficient, transparent, and consistent way when assessing claims.”