An Australian insurance group has launched an advertising campaign encouraging pandemic affected business owners to lodge a claim, but warn that the “vast majority” of cases will be held up pending a decision in the Federal Court.

The High Court has rejected an application by the Insurance Council of Australia (ICA) to appeal a test case decision which sought to clarify whether COVID-19 was excluded from extra cover for infectious diseases in a business interruption policy.

In this first test case, insurers asserted that policies which reference the Quarantine Act (which was repealed and replaced in 2015) should instead be interpreted as the now referenced Biosecurity Act. In doing so, policy holders would need to claim against a listed human disease. Where the policy refers to an exclusion clause which notes that the list of diseases is subject to “subsequent amendments” insurers argued that these referred to future amendments.

The five judges of the NSW Court of Appeal unanimously found in favour of policy holders and determined that as COVID-19 did not fall within the scope of the exclusion clause, insurer’s liability extended to pandemic related business interruption cover.

The ICA argued against such findings in their special leave application to the High Court and contested that a mistake had been made.

Whilst the High Court’s rejection of the ICA’s application is an immense blow to the Australian insurance industry, it provides insureds with the long-awaited certainty over whether they can rely on the Quarantine Act exclusion and deny liability in policies written in the same terms as the first test case.

The ICA has responded to their defeat by encouraging small businesses to lodge their business interruption cover claims but note that they await further clarification from a second test case before a “vast majority” of claims can be finalised.

The second test case commenced by insurers in February 2021 intends to clarify the meaning of policy wordings for the definition of a disease, proximity of an outbreak to a business and prevention of access to premises due to government mandate. Whilst the knockback experienced in the first test case has left insurers “disappointed”, the ICS in their statement on special leave application has “committed to applying the decisions of both test cases in an efficient, transparent, and consistent way when assessing claims”.

What does this mean for policy holders?

The end of financial year provides significant challenges in the lodgement of a business interruption claim. We encourage small and medium sized businesses to seek an urgent assessment of their policy and start gathering evidence now to calculate losses sustained from the COVID-19 pandemic before the second test case is finalised.

Elit Lawyers by McGirr & Snell is one of the only law firms who can act for insurance policy holders (businesses and individuals) against major insurers. Our senior litigation team has a combined 60 years experience acting on behalf of major insurers and know how they work. To have your policy reviewed by our team, contact Danielle Snell and Robert McGirr.

For further information please contact:


Danielle Snell
+61 401 812 885

Robert McGirr
+61 412 944 023

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