Insurers – Claims for Business Interruption and Coronavirus

We all hate to pay for the premiums, but insurance policies are a necessary element for managing business risk. We have taken a look at the regime regarding insurance and the effect on policies during Covid and found a surprising result.

The unprecedented impact of the global pandemic has been detrimental to thousands of businesses across Australia. In the face of Government regulations, businesses have been forced to close temporarily causing them significant financial and emotional burden. Despite holding business interruption insurance, many insurers have led policyholders to believe that losses as the result of COVID-19 will not be protected by their coverage. However, a recent unanimous decision of the NSW Court of Appeal favouring policyholders indicates that insurance companies may still be liable to pay these claims.

The Insurance Council of Australia (ICA) has commenced two test cases to be heard by the Court in order to seek clarity regarding the interpretation of Business Interruption Insurance policies in the context of the pandemic. The first case heard by the NSW Court of Appeal contemplated whether exclusion clauses for claims related to ‘quarantinable diseases’ under the Quarantine Act 1908 will extend to exclude losses caused by COVID-19.

The Quarantine Act 1908 is no longer in force, but it has since been replaced by the Biosecurity Act 2015. COVID-19 has been defined as a ‘listed human disease’ under this new legislation. Though this concept is arguably similar to that of a ‘quarantinable disease’ under the Quarantine Act 1908, the Court held that the clear wording of the policies meant the exclusion could not extend to an application of the Biosecurity Act 2015.

On 25 June 2021, the High Court denied insurers’ application to appeal this decision. Consequently, businesses who have experienced disruption due to COVID-19 are afforded substantial protection. Insurers who have failed to update their policies after the repeal of the Quarantine Act 1908 will likely be compelled to pay businesses who faced loss due to the pandemic.

While the decision in this first test case favours the interest of businesses, there is still ambiguity concerning the interpretation of policies in the context of COVID-19. However, these ambiguities will inevitably be clarified during the second test case. This case, which will likely commence trial in August, will consider the meaning of wordings related to the definition of disease, proximity of an outbreak to a business, and prevention of access to premises due to a government mandate. Until the court provides such guidance, insurance companies should be hesitant denying claims arising due to the impacts of COVID-19.

If you believe your insurer has incorrectly denied your business interruption insurance claim, or if you want to find out whether you may be protected for COVID-19 related loss, email us at to talk about how we can help.