Insurer goes down

Your business interruption insurance may cover you for the interruption caused by COVID-19.

Whether or not you are covered, will ultimately depend upon the working of the policy and any relevant exclusion clauses.

The wording of an insurance policy was recently considered in test case of Global Specialty SE v Wankana No. 3 Pty Ltd [2020] NSWCA 296.

This decision considered an insurer's decision to decline indemnity to a business who lodged a claim for losses stemming from the COVID-19 outbreak.

In rejecting the claim, the insurer relied upon an outdated exclusion clause which excludes "diseases declared to be a quarantinable disease under the Australian Quarantine Act 1908 (Cth) and subsequent amendments.

Unfortunately for the insurer, The Quarantine Act 1908 (Cth) was repealed in 2016 and replaced by the Biosecurity Act 2015 (Cth).

Despite the Quarantine Act 1908 (Cth) being repealed, the insurer never updated their policy, and there was no reference in the exclusion clause to the Biosecurity Act 2015 (Cth).

The question for the Court was whether the reference in the policy "to subsequent amendments" is to be interpreted to include and extend to replacement legislation.

The Court found that the policy wording of "subsequent amendments" did not extend to acts that replace the Quarantine Act and the insurer was unable to rely on the exclusion clause.

What does this mean?

If your insurance policy contains an exclusion clause which refers to the "Quarantine Act 1908 (Cth) and subsequent amendments" your insurer cannot rely upon it to avoid honouring a claim made for business interruption caused by the COVID-19 outbreak.

If you have made a claim which has been rejected on this basis, you would be encouraged to review this decision on the basis that the exclusions clause did not apply.

In the event you have not made a claim, you should check the wording of the policy to see if you are able to make a claim t0 recover the losses stemming from any business interruption caused by COVID-19.

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