High Court of Australia strikes out pandemic insurance appeals, payments to follow

Insurers could begin paying millions of dollars to those hit by Covid-19 after a High Court ruling on business interruption test cases.

The High Court of Australia has strikes out all appeals brought on by insurers.

Millions of dollars could be paid to businesses affected by the Covid-19 pandemic with the High Court striking out all appeals brought on by insurers.

Several test cases about business interruption claims went before the High Court on Friday, seeking leave to appeal the judgment of the Full Federal Court.

The High Court threw out all challenges from insurers and insured customers, which means that some of the Federal Court rulings from February still stand.

The Federal Court ruling for the most part favoured insurers, however it ruled against them in that JobKeeper subsidies could not be deducted from any business interruption insurance payouts that may be made.

The move will enable insurers to examine releasing more than $1bn in provisions set aside to cover losses over the two-year pandemic. Between them listed insurers QBE, IAG, and Suncorp hold at least $1.56bn in provisions to cover potential losses arising from Covid-19 related claims.

Insurance Australia Group holds the largest provisions, with $1.22bn set aside and Suncorp had $211m – but cut this amount to $185m after a separate court win. QBE had set $240m aside but reduced this to $139m. Insurers are now expected to begin claims assessment for eligible customers, with payouts soon to follow.

IAG shares entered into a trading halt on Friday afternoon – where they could stay until October 18 – as it weighed the impact of the High Court’s decision.

Shares had risen 2.6 per cent, or 12c, to $4.81 before IAG entered trading half on Friday. The insurer argued JobKeeper subsidies should have to be taken into account when calculating payments to the policyholder.

Among the cases seeking a High Court appeal had been The Taphouse Townsville, which focused on whether cover was available under the ‘prevention of access clause’ or the ‘hybrid clause’ in its policy as a result of Queensland’s lockdown in 2020.

The Federal Court had also refused an appeal by Star Entertainment over insurance payments. However, it ruled in some limited circumstances businesses could make a claim for pandemic losses.

The decision severely limited what types of policies could claim for Covid-19 related losses and the circumstances in which those claims could be made.

The Federal Court accepted that some policies could respond to outbreaks of Covid-19, but that the cause of loss suffered would need to be identified. However, a claim by Victorian travel agent Meridian Travel was accepted, but the court noted that the loss of 90 per cent of the business’ revenue was due to a decision by the commonwealth to close the international border.