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Insurers could face appeals from previously denied COVID-19 claims
As a result of a recent decision in the Court of Appeal, Supreme Court of NSW, insurers could now be facing appeals from previously denied claims.
Tony Zhang
In a 5-0 decision, the NSW Court of Appeal (HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296) held that an exclusion in the infectious diseases extension for quarantinable diseases notified under the “Quarantine Act 1908 (Cth) and subsequent amendments” did not exclude listed human diseases under the Biosecurity Act 2015 (Cth).
Law firm Chamberlains said they have received reports of claims being denied where businesses have held an insurance policy that has a similar, or identical, exclusion clause.
“In our view, those denials should be the subject of significant scrutiny noting the decision made by the Court of Appeal, Supreme Court of New South Wales,” Chamberlains’ director and insurance law expert Lachlan McBride said.
“Whilst we anticipate that the decision in HDI Global Specialty SE -v- Wonkana No. 3 will be subject to an appeal to the High Court of Australia, it is our view that if you hold an insurance policy which may respond to any losses suffered as a result of the COVID-19 pandemic, or you have been subject to a denial of an insurance claim as a result of COVID-19, you should seek advice and assistance.”
It is understood the judgment could open the door to thousands of claims with many insurers, including Insurance Australia Group, Suncorp, QBE, HDI, Chubb and Lloyds, being exposed.
Mr McBride said the Court of Appeal, Supreme Court of NSW had given some further guidance to assist in understanding whether an insurance policy will respond.
Claims were made on their policies for interruptions relating to COVID-19. Those claims were denied on the basis of an exclusion which read: “The cover... does not apply to any circumstances involving ‘Highly Pathogenic Avian Influenza in Humans’ or other diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendment.”
“The difficulty for the insurers in relying upon this exclusion was that the Quarantine Act was repealed on 16 June 2016 and replaced with the Biosecurity Act,” Mr McBride said.
“Notwithstanding, it was the insurers’ position that the exclusion clause should be interpreted as extending or referring to “diseases determined to be listed human diseases under the Biosecurity Act”, either due to the Biosecurity Act being a “subsequent amendment” or on the basis that the reference to the Quarantine Act was an obvious mistake.”
It is understood insurers have consistently refused to pay COVID-19-related business interruption claims on the basis that the policies explicitly exclude interruptions caused by "quarantinable diseases" with IAG, Suncorp and QBE among the major insurers to make the error.
Along with an appeal to the High Court, the Insurance Council of Australia (ICA) is calling on the insurance industry, the Australian Financial Complaints Authority (AFCA), and other shareholders on the possibility of launching another further test case.
“The industry’s intention is that it would again meet the costs of both the policyholders and the insurers in any legal process in the same fashion as the first test case regarding the Quarantine Act,” the ICA said in a statement.
“The Insurance Council will continue to work with all stakeholders and the government to provide clarity for all parties and the industry. It will provide an update on these matters as soon as they are settled in the coming weeks.”
