IAG to appeal second business interruption test case ruling

An insurer and two policyholders have filed applications for special leave to the High Court of Australia (High Court) to appeal parts of the recent ruling in the second business interruption (BI) insurance test case, according to the Insurance Council of Australia (ICA).

In February 2022, the Full Court of the Federal Court of Australia (Full Court) upheld Justice Jayne Jagot’s judgment in October 2021 that the insuring clauses did not apply to pandemic coverage in nine of 10 cases. It also noted that insurers could not rely on a section of Victorian property legislation to exclude liability, clarifying key issues relating to wording in BI insurance policies, such as disease definition, COVID-19 outbreak proximity, the impact of government mandates, and other policy wording issues.

Despite the ruling, Insurance Australia Group (IAG) filed an application for special leave to appeal to the High Court, focusing on whether JobKeeper payments must be considered when calculating the amount of the insurance payment (if any) to the policyholder.

Although the trial judge decided that JobKeeper payments should be considered, the Full Court took a different view.

The ICA, which backed IAG’s application, explained that the decision on JobKeeper payments is crucial for insurers and policyholders, given the number of businesses that participated in the JobKeeper program.

Read more: Does the Federal Court judgement exclude pandemics from BI cover?

Policyholders Taphouse Townsville Pty Ltd (Taphouse Townsville) and LCA Marrickville Pty Ltd (LCA Marrickville) have also each applied for special leave to appeal to the High Court.

Specifically, Taphouse Townsville’s appeal focused on whether cover is available under the “prevention of access clause” or the “hybrid clause” in its policy. Meanwhile, LCA Marrickville focused on whether cover is available under the “prevention of access clause” or the “catastrophe clause” in its policy.

The option for the appeals by the insurers and policyholders was agreed to as part of the original decision to seek an outcome from the courts through test cases.

Commenting on the applications for special leave to appeal to the High Court, ICA CEO Andrew Hall said: “While we understand there is frustration that the matter continues through the courts, we recognise the need for both policyholders and insurers to obtain definitive guidance from the courts as to how relevant business interruption policy wordings are to be interpreted and applied.”