On 21 February 2022, the Full Court of the Federal Court of Australia delivered two judgments in the Second COVID-19 Australian Business Interruption Test Cases.
The second test cases were commenced to obtain clarity on legal issues concerning the operation of coverage triggers for Business Interruption cover in common commercial property policy wordings. The cases also considered the effect of government financial support and other third party payments to insureds, including JobKeeper.
Conclusion: The Full Court’s judgment was broadly in favour of insurers, largely dismissing the appeals of the Policyholders and upholding the earlier Federal Court Judgement delivered in October 2021.
In terms of what can be learned from these latest judgements to assess if a Policyholder can make a (Covid19 related Business Interruption) claim, here are two key findings:
- Where a policy contains ‘specific cover’ for claims arising out of ‘disease’, cover is limited to that clause. In those cases, a Policyholder cannot claim under other ‘non-damage’ clauses including ‘Prevention of Access’, ‘Catastrophe’ or ‘Loss of Attraction’ clauses. This essentially means that the ‘disease clause’ was held to have set out the extent of the insurer’s indemnity for such a (disease related) claim.
- JobKeeper and other third party payments are not to be considered, in the claim adjustment process. In short, these Government assistance payments cannot be used by Insurers, to offset Businesses Interruption losses in a successful Covid19 related Business Interruption claim.
Lastly, although these judgements provide further guidance on how Policies will specifically respond to successful Covid19 related Business Interruption claims, it is important to recognise that cover availability will ultimately turn on the specific policy wording issued to individual insureds, and also their own factual circumstances.
The parties now have until March 23 to appeal to the High Court.
Copies of the most recent Judgements are available online at:
Covid19 Related Business Interruption Claims | Latest Update | November 2021
In our October 21 update we reported that the Federal Court was due to hear an appeal to the recent ‘test case judgement’, that found in favour of the Insurers in respect to certain Policy triggers for Business Interruption claims.
What are the Latest Developments?
That appeal of the second test case concluded on Friday 12 November 2021 and the Federal Court reserved its decision. A final judgement is anticipated by the end of 2021 or shortly thereafter.
So What Happens Now?
All parties will await the final judgement of the Federal Court, before final guidance can be provided to Policy holders on any potential Business Interruption claims under their specific Policy.
What Does This Mean for Your Potential Business Interruption Claim?
Once the Federal Court decision is handed down at the end of the year, the Insurance Council of Australia (ICA) in conjunction with the National Insurance Brokers Association, will release specific guidance for Policy Holders as to the circumstances and types of Policy under which they may be able to launch a successful Business Interruption claim.
In the meantime as we set out in our last update, Coastsure is progressively reaching out to our clients who have the Business Interruption cover under their Business Insurance Programs, in order to provide some initial guidance regarding the preparation of their potential claim.
What Do You Need to Do?
In anticipation of the Federal Court decision, it would be prudent to get together as much documentation as you have available that may attest to the extent and circumstances of your Business Interruption experienced during the pandemic.
To assist you to do this, the ICA has prepared a ‘general outline’ of the documents and information required to submit a BI claim. This list is for guidance only as each claim will be different and your insurer may require additional material. However, by preparing the material detailed in this list, your insurer will be able to assess your claim more efficiently. The document can be accessed here: https://insurancecouncil.com.au/wp-content/uploads/2021/10/Business-Interruption-Document_Information_requirements-draft-24.09.pdf
In the meantime, we again encourage clients who have questions in regard to their eligibility to make a Business Interruption claim, to contact their Coastsure Insurance Broker to discuss their situation.
Our next update will follow the release of the final determination by the Federal Court, when we will be able to provide a full summary of the determination and guidance on your next step in the process of a potential Business Interruption claim.
Further details regarding the Federal Court’s determination can be accessed on the Federal Court’s web page