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Hope for Australian businesses after insurers lose Covid test case

Posted: 19 November 2020 12:23 pm
News

Store closed sign

There's good news for Australian businesses this week after the NSW Court of Appeal ruled against insurers in a landmark test case for Covid-related claims.

In short, the decision means many businesses will now be able to claim on their business interruption insurance for pandemic-related closures. Incredibly, it's all down to a simple oversight by insurance companies.

How it happened

So far, insurers have relied on a single clause within their product disclosure statements (PDS) which excludes claims caused by "quarantinable diseases" listed under the Quarantine Act.

But that act no longer exists. It was repealed way back in 2015 and was replaced by the Biosecurity Act. Insurers, it seems, simply failed to update their policies.

The insurance industry argued that the clause was supposed to include the Biosecurity Act but the NSW Court of Appeal rejected their argument.

Josh Mennen, an insurance lawyer at Maurice Blackburn, said it was a stretch for the insurance industry to even try this argument.

"They were obviously caught out and this can only be described as a major blunder by the policy drafters," he told Finder. "It's good to see the court has taken the approach it has."

What it means

As the decision was part of a test case, it's only binding to the two parties involved. In this case, it's insurance company HDI and a business it covered.

However, the decision has far-reaching implications. There is now a precedent that other cases can follow and - importantly - that precedent favours consumers.

While this is certainly good news for Australian businesses - insurance companies excluded - Mennen did warn that it doesn't automatically guarantee success for every business impacted by the pandemic. There are other conditions that need to be met too.

"The outbreak needs to be within a certain parameter of the premises and the closure needs to be by order of government authority," he said. "So just because we have this decision, doesn't mean that the insurer is going to roll over on all claims."

Despite this, Mennen encouraged any impacted business to lodge a claim if they have a policy. There's no harm in doing so but, if you wait, you could be out of luck.

"We've been urging all insureds to make a claim if they have a policy and they've been affected," he told Finder. "A lot of these policies have time limits on lodging claims so it's important that insureds are preserving their rights."

Picture: GettyImages

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