Further business interruption class actions looms as ICP weighs options

Litigation funders ICP is gathering claimants for a class action against insurers as a potential appeal to the High Court nears.

ICP ‘gauging interest’ in business interruption action. Picture: NCA NewsWire / Jeremy Piper

Litigation funders Investor Claims Partner is shopping around another potential class action to capitalise on a recent landmark win by policyholders in a business interruption test case in NSW.

In an email seen by The Australian, ICP is examining the potential class action, offering policyholders the opportunity to have their claims assessed by Clayton Utz, the law firm which ran the successful claim for the insured in NSW.

The emails to brokers, sent by ICP chief operator officer Simon Weeks, proposes that brokers modify a template letter to send to clients to advertise the potential class action.

“ICP proposes to fund collective action by insureds against insurers who issued policies in Australia that are likely to cover losses caused by BI due to COVID-19,” he said.

“We kindly request you make contact with your applicable clients this side of Christmas to take advantage of the quiet new year period to consider this matter.”

The email notes “the funders intend to move quickly”.

Many renewed business interruption policies have been rewritten to exclude potential claims and remove references to the defunct Quarantine Act.

The NSW Court of Appeals found policies which referenced the Quarantine Act were not able to block claims arising from the COVID-19 pandemic.

But a recent Federal recent court judgment in Victoria found businesses which held policies referencing the Biosecurity Act were not shut-out from making claims against their insurer.

Suncorp subsidiary Vero lost in the first round of its fight against a Melbourne business, with the court finding the Victorian government lockdown opened the way for potential claims.

ICP chief executive and Association of Litigation Funders of ​Australia chairman John Walker said he expected to have a gauge of interest in any potential case by mid-January, but noted there may not be a need to run a case depending on how insurers responded.

“It depends on the insurers, if they don’t get leave to the High Court, which may occur, it may become a claims resolution process in that case,” he said.

He said the argument from insurers that they never intended to cover pandemics had not been reflected in legal judgments.

“The story here is the insurer have been making public representations that their policies do not cover losses flowing from businesses being interrupted by COVID,” he said.

“As parties who have good faith duties and are subject to laws where misleading and deceptive conduct is against the law, the insurers should be careful about the representations they are making.”

On Monday Suncorp CEO Steve Johnston was in lock-step with statements from the rest of the insurance industry when he said the insurer had never set out to cover pandemics.

“Unfortunately, pandemics are an uninsurable risk and premiums have not been paid to cover an event of the scale of COVID-19,” he said.

However, in October ASIC deputy chair Karen Chester wrote to insurers reminding them “about their duty to handle insurance claims with utmost good faith”.

“We strongly encourage general insurers, Lloyd’s coverholders and brokers to communicate with policyholders in a way that not only meets minimum requirements not to mislead or deceive, but also helps Australian small businesses make appropriate and informed decisions about whether they should lodge claims for business interruption losses arising from COVID-19,” Ms Chester said.