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Insurers have lost a test case on coverage for businesses that closed due to coronavirus, potentially opening the door to hundreds of millions of dollars in payouts.
The NSW court of appeal on Wednesday ruled that clauses in insurance policies that worked to exclude damage from viruses declared to be quarantinable under the Quarantine Act were invalid because the law was repealed in 2015 and replaced with a new one.
However, the Insurance Council of Australia, which funded the case, said it was considering appealing to the high court.
“The ICA, in consultation with its members and legal representatives, will urgently review the determination and specifically the grounds on which it could seek special leave to appeal against the decision to the high court of Australia,” the council said in a statement.
The case involved the operator of a tourist park in Tamworth that held business interruption insurance and was forced to close because of the Covid-19 outbreak.
Avian flu and “other diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments” were excluded from coverage under the policy.
The insurance industry argued that the reference to the Quarantine Act should be read to include the Biosecurity Act, which replaced the Quarantine Act.
However, in their rulings, all five court of appeal judges who heard the case said this was wrong.
This was so even though the Quarantine Act had been repealed and replaced by the Biosecurity Act at the time the policy was issued in April 2019.
“One may suspect that, in not amending their policy documents to refer to the Biosecurity Act, a mistake was made,” Judge David Hammerschlag said.
“Suspicion is insufficient. There is no basis to suspect that the insureds overlooked anything.
“If the insurers had made a mistake and they wished to contend that the insureds shared in that mistake when entering the policy, it was open to seek to rectify the policies, but no such application was made.”
He said it seemed to him that it would have made commercial sense for the policy to refer to a current law rather than “one repealed four years earlier”.
But what was agreed “is not a clear mistake and, if it is, it does not rise to the level of absurdity”.
Source: The Guardian
Keyword: Huge payouts possible as insurers lose test case over Covid-hit businesses | Business