As a result of a highly anticipated test case concerning COVID-19 delivered on 18 November 2020, small, medium and large sized business may be able to successfully make insurance claims for business interruption suffered as a result of COVID-19.
In the case of HDI Global Specialty SE v Wonkana No. 3 Pty Ltd trading as Austin Tourist Park  NSWCA 296, five judges of the Court of Appeal unanimously held that insurance companies cannot exclude indemnity under certain policies providing cover for business interruption on the basis that COVID-19 falls within an exclusion for certain serious infectious or contagious diseases.
Facts of Case
A tourist/caravan park business and retail business (the named defendants) were insured against interruption to their businesses which included cover against the outbreak of an infectious or contagious human disease. They each made insurance claims for business interruption caused by COVID-19, which were declined.
The insurer submitted that the insurance policies did not respond because they contained an exclusion that was intended to carve out all serious infectious diseases, including those under the former Quarantine Act 1908 (Cth) (QA) and the current Biosecurity Act 2015 (Cth) (BA).
The QA was repealed on 16 June 2016 and replaced by the BA, which did not provide for declarations of quarantinable diseases by the Governor-General, but provided for determination of ‘listed human diseases’ by the Director of Human Biosecurity. COVID-19 was not declared to be a quarantinable disease under the QA before it was repealed, but it was determined to be a listed human disease under the BA on 21 January 2020.
The NSW Court of Appeal was asked to rule on the primary question before it, being whether the words ‘declared to be quarantinable diseases under the Quarantine Act 1908 (Cth)‘ appearing in the policy wording should be read as ‘determined to be listed human diseases under the Biosecurity Act 2015 (Cth)’.
In summary, the Court of Appeal unanimously held that:
- COVID-19 is not a disease declared to be a quarantinable disease under the QA and the exclusion is not enlivened (meaning the insurer cannot decline indemnity under this exclusion);
- the reference to the QA in the exclusions of the policies would not be read as incorporating the BA because it was a meaning inconsistent with the orthodox canons of interpretation;
- the wording of the insurance policies should stand without forcing the insurers’ intended meaning upon them;
- a reasonable person would have understood the words ‘and subsequent amendments‘ used in the policies to include a reference to the BA, and as a matter of construction, the references to the QA could not be construed as references to a replacement statute;
- the parties must have understood there was a possibility that the law relating to quarantine could be altered, not merely by amendment of the Quarantine Act and the outcome could have been avoided by more careful drafting by underwriters, noting that elsewhere in the policies there was reference to the Insurance Contracts Act ‘or any subsequent legislation’.
In particular, Meagher JA and Ball J noted that a written contract involves determining the intention of the parties as expressed in the words in which their agreement is recorded and referred to Lord Wright in the decision of Inland Revenue Commissioners v Raphael  AC 96 at 142, in which he stated: “It must be remembered at the outset that the court, while it seeks to give effect to the intention of the parties, must give effect to that intention as expressed, that is, it must ascertain the meaning of the words actually used”.
The upshot of the above decision is that if your business has business interruption insurance, it may now be able to successfully claim for losses suffered as a result of COVID-19.
Although the above decision may be the subject of a possible appeal by insurers, if your business has held off from making an insurance claim because of any alleged COVID-19 exclusion, it should now reassess and seek legal advice as to whether your insurance policy may respond to cover for losses sustained as a result of the COVID-19 pandemic.
For more information concerning your own insurance policy and how cover may apply, please contact Danielle Snell or Robert McGirr on the numbers listed below.
+61 401 812 885
+61 412 944 023