The Australian Financial Complaints Authority has confirmed that, together with the Insurance Council of Australia (ICA), it will seek a decision from a superior court on whether references to a quarantinable disease should be considered as equivalent to a listed disease under the Biosecurity Act 2015 in various policies issued to small businesses with business interruption coverage.
Many such insurance policies, taken out by small businesses, reference the Quarantine Act 1908, which was scrapped in 2016 and replaced by the Biosecurity Act 2015. Others, however, reference the act as amended, which is what the case is expected to include as a point of contention.
“A decision from a superior court will assist insurers, AFCA and customers in developing a better understanding of how exclusions in policy documents respond to the unique circumstances of the COVID-19 pandemic,” said Rob Whelan, CEO, Insurance Council of Australia.
“Insurers believe the intention of pandemic and communicable human disease exclusions are clear. However, a judicial determination will provide insurers and AFCA with greater legal certainty on this issue.”
AFCA confirmed that the legal costs of the test case will be funded by the ICA. Its lead ombudsman, John Price, explained that AFCA agreed to the test case following discussion with the insurance industry, ASIC, APRA and the Treasury.
“Resolution of this threshold issue is important to assist AFCA in its dispute resolution role,” Mr Price said.
“I am pleased the Insurance Council of Australia and its members have engaged with AFCA in identifying claims that will form the combined test case.
“I am also appreciative of the complainants for agreeing to have their cases heard in this manner.”
The outcome of the case is expected to provide some clarity for all stakeholders, in particular small businesses and insurers.