Business Interruption Claims

Due to the ongoing impact of the Covid-19 pandemic across Australia, disputes between businesses and insurance policy companies have been rife. The issue? Making a Business Interruption claim under a Business Interruption (BI) policy.

BI policies are designed to financially bail out companies when they experience a major disruption to trade, like a fire or a natural disaster. However, many insurers have stated their policies were not written to provide cover for a pandemic.

The unprecedented impact of the Covid-19 pandemic has created the need for court determinations on key aspects of business interruption cover.

In January this year, ABC News reported that there were at least five legal firms investigating potential class action lawsuits against the insurance industry over its denial of business interruption policy payouts during the pandemic. The insurance sector was vigorously defending its stance – if they were to pay out the liability, it was estimated to be worth up to $10 billion. (You can check out that article here.)

In a massive blow to many insurance companies, it has since been established in a test case by the High Court that an insurer can’t deny cover for a Covid related business interruption claim if the policy refers to the Quarantine Act. (Check out the ABC News article on this here.)

Many BI policies in Australia sought to exclude cover for pandemics through a reference to the Quarantine Act, however the Quarantine Act was repealed in 2015 and replaced by the Biosecurity Act.

Although the first test case was decided by the NSW Court of Appeal the decision is relevant to all Australian claims regardless of location. Importantly, the High Court refused the insurers’ application for special leave to appeal the NSW Court of Appeal’s decision. This represents the end of the road for the dispute, and the NSW Court of Appeal’s decision stands.

However, there are further interpretations of aspects of business interruption policies that need to be resolved to establish whether policyholders will ultimately be covered.

A second test case in the Federal Court of Australia, which has commenced, will be heard from late August 2021. This second test will determine the meaning of;

+ Policy wordings around disease definition

+ Covid outbreak proximity

+ The impact of government mandates and

+ Other policy wording matters

Many BI claims will not be able to be finalised until the second test case provides further clarity on the legal principles used to resolve disputes.

The Insurance Council of Australia has posted a comprehensive summary of the BI test case on their website which you can access here.

Every Business Interruption policy is different. If you have a Business Interruption policy but you’re unsure if you can claim under it due to Covid-19, we may be able to help.

As experts in Insurance Law and Dispute Resolution, contact our friendly team on for further assistance.