QBE to test Victorian law after missing out in Federal Court

Major Australian insurer QBE is set to test its own policy wording in the federal court.

The case, filed in the Federal Court by the major insurer, seeks to test a statutory provision in Victorian property law. Picture: AAP

QBE has launched its own test case after missing out in its attempt to test questions of business interruption insurance policy wording in the second round of legal action.

The case, filed in the Federal Court by the major insurer, seeks to test a statutory provision in Victorian property law.

The case seeks to clarify whether references to the Quarantine Act in a QBE business interruption insurance policy ought to be interpreted as equivalent to the Biosecurity Act.

The case will examine a potential $2.3m claim for business interruption by liquidators of a failed Victorian travel agency Education World Travel, which entered liquidation in November last year.

QBE will pay costs for the lawyers for BRI Ferrier, the liquidators of the business.

Dentons will represent QBE in this case, while BRI Ferrier will be represented by KHQ.

By pitching its legal test in the Federal Court QBE is attempting to have its case taken up and run alongside the current test case bundle.

The Insurance Council of Australia, with approval of the Australian Financial Complaints Authority, put forward nine separate small business claims covering five insurers.

The claims, which had been lodged with AFCA, did not include any claims lodged with major Australian insurers QBE or Suncorp.

Federal Court Chief Justice James Allsop is set to hear arguments on the nine current test cases in the last quarter of 2021.

The rapidly growing business interruption insurance test case imbroglio is making it harder for either side to find legal counsel without a conflict of interest.

A QBE spokeswoman said the insurer believed it was important to provide certainty on the Property Law Act issue at the same time as other questions of business interruption insurance law were tested in the Federal Court.

“We hope that the outcome of this court determination, plus the second industry test case, will be a one-step process for providing greater clarity to both customers and insurers alike and establish a path forward to manage these claims,” she said.

QBE, if successful in its attempt to test the Victorian legal wording, would neutralise any business interruption claims arising from pandemic-affected business in the state.

Berrill and Watson principal John Berrill said the Victorian property law question had been looming in the background for some time, but he was of the view it did not preclude claims from businesses.

“We take the view that it doesn’t and what it covers is contracts in a property law setting,” he said. “These are not contracts in a property law setting.”

The insurance industry lost its bid in the NSW Supreme Court to block claims from policies that referenced the Quarantine Act.

The industry had argued that these policies, which made reference to diseases listed under the Quarantine Act, which was repealed by parliament, ought to stop businesses attempting to make claims for interruption caused by the COVID-19 pandemic.

An attempt by the industry to appeal the NSW supreme court judgment to the High Court is still pending.

The industry had a small win in March when the court confirmed it would hear arguments.

The insurance industry has long maintained it did not price policies to cover a pandemic.

QBE has been stung by the COVID-19 pandemic, having been forced to set aside $240m to cover claims arising from the loss of a test case in Britain.