Court Rules In Favour Of Insurers In Second Business Interruption Test Case

Court Rules In Favour Of Insurers In Second Business Interruption Test Case

The Federal Court of Australia has found in favour of the country’s biggest insurers in the second COVID-19-related business interruption test case. The finding means the insurers will not be forced to pay billions of dollars in compensation related to pandemic losses. However, an appeal has already been lodged.

The Insurance Council of Australia (ICA) said the ruling upheld the arguments advanced by insurers in eight of the nine matters in the test case. In one matter, the court found the cover had been triggered, but held there were substantial issues as to whether the policyholder could prove any relevant business interruption.

The ICA said the court anticipated and planned for the decision to be appealed given the complex nature of the matter and the need to provide clarity to insurers and policyholders as quickly as possible. As such, the court had set aside time in the second week of November 2021 for the full court to hear any appeal filed by insurers or policyholders. The ICA said the industry will meet the costs of policyholders in any appeal process.

The council and its members are reviewing the reasons delivered by the court and will provide a further statement next week.

Andrew Hall, CEO of the ICA, said the council welcomed the court judgment as it provides an important step towards finalising the matters.

“Insurers, including those not directly involved in the court proceedings, are committed to applying the principles of the courts’ final ruling consistently and efficiently to all business interruption claims.”

Suncorp said while the court finding is a positive judgement for insurers, its $211 million provision for potential business interruption claims relating to COVID-19 remains unchanged pending any appeal process.

“The Group will complete a full review of the provision as part of its normal process to prepare the interim FY22 results. Suncorp recommends that customers lodge any COVID-19 business interruption claims they may have,” the company said. “Claims will be assessed as expeditiously as possible and in accordance with the policy terms and circumstances.”

IAG said the judgment is detailed, and a comprehensive analysis is required to assess the impact, noting it will vary by insurer.

“IAG is reviewing the judgment to determine whether to appeal any aspect of the judgment,” the company said. “It will also consider the potential impact on IAG’s business interruption provision announced in November 2020 and any required update will be provided at the appropriate time.”