JobKeeper key issue in High Court BI appeal

The High Court will be asked to overturn a ruling on whether JobKeeper support payments should be taken into account when calculating business interruption payments for pandemic disruptions, but a decision on whether the matter will be considered is months away.

The leave to appeal application related to JobKeeper has been filed by IAG, with support from the Insurance Council of Australia (ICA), which says the issue is important for policyholders and insurers across the industry, given the number of businesses that participated in the support program.

The initial trial judge in the second business interruption test case held that JobKeeper payments should be taken into account, but the Full Court decision handed down on February 21 took a different view.

Appeal applications have also been lodged on behalf of two policyholders involved in the test case, with the insurance industry continuing to meet their costs as part of the process.

The Taphouse Townsville appeal, also involving IAG, deals with whether cover is available under prevention of access or hybrid clauses in the policy while LCA Marrickville’s appeal, in a claim with Swiss Re, centres on whether cover is available under the prevention of access or the catastrophe clauses.

“Both the trial judge and the Full Court found in favour of the insurers on these issues, holding that the policyholders were not entitled to cover under any of these insuring clauses,” ICA says.

The High Court may determine the special leave applications “on the papers” or could decide it wishes to hear oral arguments on whether to take the matters further.

“We do not anticipate that any decision on the special leave applications will be made for approximately three months from the date the applications were made,” ICA says.

Insurers are otherwise not seeking to contest findings from the Full Court decision, which went substantially in favour of underwriters.

IAG said today that at this stage there will be no adjustment in its $1.2 billion net provision for potential business interruption claims.

“As the legal position becomes more certain and claims experience emerges, IAG will refine the prediction of ultimate claim costs and adjust its provision accordingly,” it says.

“Current indications are that a release from the provision will occur and is likely to be recognised over time, subject to court processes and the time required to allow for claims development.”

The High Court website shows an application to appeal has also been filed in The Star Entertainment Group v Chubb, which was not part of the industry test case, but which was heard by the Full Court at the same time.