COVID-19 BI Test Case Update

Swiss Re International SE, Australia Branch (Swiss Re Corporate Solutions) notes the decision delivered by the NSW Court of Appeal on 18 November 2020 (First Judgment) in the first test case concerning policies with exclusions which refer to diseases declared under the Quarantine Act 1908 (Cth) "and subsequent amendments". The Court determined that exclusions worded in that way would not be effective to exclude disease listed pursuant to section 42(1) of the Biosecurity Act 2015 (Cth), such as COVID-19.

The First Judgment was the subject of an application for special leave to appeal to the High Court of Australia. However, that application was unsuccessful.

Swiss Re Corporate Solutions has issued or underwritten some policies containing exclusion clauses referring to the Quarantine Act "and subsequent amendments" or the Quarantine Act "as amended". In light of the First Judgment, Swiss Re Corporate Solutions will not read references to "and subsequent amendments" or "as amended" to mean references to the Biosecurity Act.

The First Judgment does not necessarily mean that policyholders are entitled to cover for business interruption loss they may have suffered as a result of the COVID-19 pandemic and government action. The availability of cover in each case will depend on the terms of the Swiss Re Corporate Solutions policy and the particular circumstances of each policyholder’s claim.

Several insurers commenced proceedings simultaneously in the Federal Court of Australia to form a second test case. The second test case concerns a broad range of issues including the meaning of "outbreak", proximity of an outbreak to a business, and prevention of access to premises due to government orders. The second test case was heard from 6 September 2021 to 15 September 2021.

Swiss Re notes the decision delivered by the Federal Court on 8 October 2021 (Second Judgment). The Second Judgment found eight of the nine policies under consideration in the second test case did not provide cover for business interruption losses as a result of the COVID-19 pandemic and government action. It also found that various payments received by policyholders such as JobKeeper and rental relief are to be taken into account when loss is assessed under any policies which do provide cover. The Second Judgment is lengthy and complex and it will take some time for Swiss Re Corporate Solutions to complete its analysis of the decision.

The Federal Court has granted leave for appeals from the Second Judgment to be filed by 15 October 2021, with the hearing of any appeals listed to commence on 8 November 2021.

Most claims lodged with Swiss Re Corporate Solutions to date cannot be finally assessed until the final non-appealable outcome in the second test case is known.

Further information about the second test case can be found at: https://insurancecouncil.com.au/issues-in-focus/bi-test-cases/

Swiss Re Corporate Solutions will await the final determination of issues in the second test case before finalising its consideration of business interruption claims arising from COVID-19.

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