Important updates regarding COVID-19 Business Interruption Cover

LAST UPDATED: 19/11/2020


Understanding your Insurance policy

At times like this, understanding your insurance policy is essential. Understanding what you are covered for is just as important as understanding what you’re not covered for. While your insurance arrangements with Guild are specific to your individual circumstances and profession, following is some general information to bear in mind during this COVID-19 pandemic.

 


NSW Court of Appeal Test Case findings


What were the findings of the case?

The NSW Court of Appeal recently delivered a judgement in a test case relating to business interruption insurance – specifically whether insurers can rely on policy exclusions referencing the Quarantine Act 1908 (Cth) rather than the Biosecurity Act 2015 (Cth) in relation to COVID-19.

The result of the NSW Court of Appeal’s judgement is that exclusions with reference to the Quarantine Act 1908 (Cth) or subsequent amendments, rather than its replacement the Biosecurity Act 2015 (Cth), cannot be enforced by insurers in relation to COVID-19. The court judgement did not consider whether exclusions referencing the Quarantine Act 1908 (Cth) or successor legislation were enforceable or not.

The Court judgement did not consider exclusions that reference the Biosecurity Act 2015 (Cth). Guild’s Business Interruption insurance is designed to cover local outbreaks of infectious or communicable diseases, such as Legionnaires, that if found at your business premises would require you to close your business to allow for deep cleaning before reopening again. We are not currently able to cover a widespread pandemic outbreak such as COVID-19, and we do not charge you a premium for this. As such, Guild is continuing to enforce exclusions referencing the Biosecurity Act 2015 (Cth) pending any future legal processes meaning that claims arising from such policies in relation to COVID-19 induced loss of income are not being accepted.



What exclusion did this case relate to?

Your policy contains an exclusion for claims triggered by a disease that is notifiable under the Infectious Disease and Pandemic Exclusion, which references the Quarantine Act 1908 (Cth) and subsequent amendments or successor legislation, i.e. the Biosecurity Act 2015 (Cth).

Your policy contains an 'Infectious and Transmissible Disease' General Exclusion for claims triggered by a disease that appears as a listed human disease under the Biosecurity Act 2015 (Cth).



Is my policy changing?

On renewal, all Guild Insurance policies now include an exclusion that means Business Interruption cover does not exist when an infectious disease is defined as a listed human disease under the Biosecurity Act 2015 (Cth).



Why was there a court case – was Guild taken to court?

No, the case was not specifically about Guild’s policies or exclusions. The test case was initiated and fully funded by the Insurance Council of Australia to provide clarity on the application of such infectious disease exclusions in relation to Business Interruption across the entire Australian insurance industry.

The case was prepared in consultation with the Australian Financial Complaints Authority (AFCA), as part of its dispute resolution process.

 



What does this mean for my policy?

The NSW Court of Appeal judgement has no material impact on your Guild Insurance Policy.

The court's judgement means only that insurers cannot enforce policy exclusions referencing the Quarantine Act 1908 (Cth) in relation to COVID-19 induced losses.

Your Guild Insurance policy contains an infectious disease exclusion that references either the Biosecurity Act 2015 (Cth), or successor legislation to the Quarantine Act 1908 (Cth), which in effect is the Biosecurity Act 2015 (Cth). The result of the exclusion in your policy is that Business Interruption cover is not available when an infectious disease is a listed human disease under the Biosecurity Act 2015 (Cth).

On 21 January 2020, 'human coronavirus with pandemic potential' was added to the Biosecurity (Listed Human Diseases) Determination 2016 as a listed human disease. This addition acted to enliven the infectious diseases exclusion in your policy, meaning that your business is not covered for loss of income or gross profit resulting from COVID-19.

 



What is a listed disease?

While the Department of Health maintains a list of over 50 ‘Listed Diseases’ there are eight key diseases that are listed under the Biosecurity Act 2015, including:

  • Human influenza with pandemic potential
  • Plague
  • Severe acute respiratory syndrome (SARS)
  • Middle East respiratory syndrome
  • Smallpox
  • Viral haemorrhagic fevers
  • Yellow Fever
  • Human coronavirus with pandemic potential

As Human Coronavirus with Pandemic Potential is listed here under the Biosecurity Act 2015, it is excluded from your cover.

 



When was COVID-19 added to the Department of Health list of Human Disease?

On 21 January 2020, ‘human coronavirus with pandemic potential’ was added to the Biosecurity (Listed Human Diseases) Determination 2016 as a listed human disease.

 



Were the exclusions put in place to get out of paying this year?

No, this exclusion has been in place for a number of years now, nothing has changed due to recent events.

 



Are these exclusions just limited to Guild’s policies?

No, our experience shows that this exclusion is very common in insurance. The recent NSW Court of Appeal judgement related to exclusions in the policies of HDI Global Speciality SE and The Hollard Insurance Company Limited. While there may be some exceptions, most business insurance policies do not respond to the outbreak of an infectious disease that is outside the immediate area, especially interstate or overseas, and therefore not directly impacting the insured property, or business.

 



Why is this exclusion in place?

Following on from the outbreak of SARS (Severe Acute Respiratory Syndrome) in 2003, insurers around the world began to model the impact that a similar pandemic could have on the industry due to both the individual size, and number of claims such an event could trigger.

The alarming finding to come out of that exercise was that the funds held by the Australian insurance market could not meet the financial demand generated by claims on such a massive scale. Putting it simply, paying business interruption claims that were responding to a global pandemic would bankrupt the Australian insurance industry, essentially voiding all other insurance.

Because of this experience, while there may be some exceptions, most business insurance policies do not respond to the outbreak of an infectious disease that is outside the immediate area, especially interstate or overseas, and therefore not directly impacting the insured property, or business.

 



Will this situation change soon?

Guild Insurance seeks to only make promises that we can keep, especially in times of need. We also strive to provide the level of coverage that you have come to expect during your time with us.

Although there may be ongoing legal proceedings, we are providing this update to keep you fully informed of the test case determination and what it means for you, along with ensuring all policies and future exclusions continue to be clearly defined.



Can I make a complaint to the Australian Financial Complaints Authority (AFCA) while an appeal to the Test Case judgement is running?

Yes, you can make a complaint to AFCA, provided you are eligible to do so.

If your complaint relates to a policy that contains a Quarantine Act exclusion, AFCA has agreed to await the final resolution of the Test Case before considering how this may affect your complaint.



If my claim was previously declined, will the Test Case change this?

The outcome of the Test Case is that exclusions referencing the Quarantine Act cannot be enforced by insures to deny claims for COVID-19 induced losses. However, a number of policy triggers need to be met in order for your claim to be approved and we will need to reassess your claim in light of these triggers subject to application of other relevant policy exclusions, industry test cases and/or other legal processes. 



My business does not operate in NSW. Will the Test Case affect my claim?

Guild and AFCA have agreed to follow the final determination of the Test Case when considering similar claims made by customers in other states and territories.

The Test Case is being decided by the NSW Court of Appeal, but it is likely that other courts would have regard to the Test Case if considering similar cases.

For further information on support measures offered by insurers in relation to COVID-19, please visit the Insurance Council of Australia’s FAQ page here.

Please do not hesitate to contact your Account Manager, or a Customer Care Specialist by calling 1800 810 213 if you would like to discuss any of the above options.

 

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