25 Nov Business Interruption Insurance
Businesses Win Important First Round Decision
In mid-April 2020 at the height of the Covid-19 crisis & Legal was receiving regular calls from landlord clients seeking advice on whether the exclusion clauses relating to their business interruption insurance would prevent a claim for loss of turnover due to forced closure as a result of the pandemic.
& Legal reviewed multiple policies issued by various insurers and identified a common mistake. The policies all referred to the Quarantine Act 1908 which had been repealed in 2016 and naturally Covid-19 had not been declared to be a quarantinable disease under that Act.
A whole new regime under the provisions of the Biosecurity Act 2015 and Biosecurity (Listed Human Diseases) Determination Act 2016 came into effect on 16 June 2016, replacing the Quarantine Act 1908.
However, the new legislation was not referred to anywhere in the policy terms and & Legal thought it reasonable to conclude that if the insurer had intended to broaden the exclusion parameters to include diseases covered by the 2016 legislation, it could easily have amended the policy wording to invoke the new Act, rather than retaining the now repealed legislation.
& Legal believed that the provisions of the Biosecurity Act did not fall within the exclusion in the insurance policies and therefore felt that our clients should be covered. Nonetheless, & Legal anticipated that insurers would argue that the Biosecurity (Listed Human Diseases) Determination Act 2016 should be regarded as a subsequent amendment of the Quarantine Act 1908 thereby giving cause to reject business interruption claims related to Covid-19.
On 18 November 2020, the NSW Court of Appeal delivered its decision in HDI Global Specialty SE v Wonkana N0 .3 Pty Ltd trading as Austin Tourist Park  NSWCA 296. The decision was highly anticipated by both insureds and insurers seeking clarity form the Court in relation to certain exclusion clauses which reference the Quarantine Act 1908, and whether those references encompass the Biosecurity Act 2015 and, if so, the timing of the application of the exclusion.
Claims against business insurance policies have generally tended to relate to operational downturns often associated with calamities such as bush fires, floods or earthquakes. It would certainly be unusual for a policy to specifically recognise a claim for business interruption due to a pandemic. In a physical sense Covid-19 does not create loss through property damage.
Nonetheless, this did not stop a new wave of lawsuits against multiple insurance companies globally. Many of these claims sought coverage for “business interruption” after many governments took actions forcing businesses to close.
The case recently determined in the NSW Court of Appeal unanimously rejected the insurers’ arguments, finding that a “reasonable person” would not have assumed references to the Quarantine Act would naturally infer replacement by the Biosecurity Act.
The battle may not be over yet as it is anticipated that the insurers may seek leave to appeal the Court of Appeal’s decision in the High Court.
Should you be in doubt about the extent of coverage within your policy your first step would be to contact your insurance broker. If you are dissatisfied with the response or have further questions phone or email & Legal on 9328 2944 or email; firstname.lastname@example.org and we will assist.