In what has come as a shock to the insurance industry, the Australian Securities and Investments Commission and the Insurance Council of Australia have lost a case brought before the New South Wales Court of Appeal (‘the Court’) relating to businesses impacted by COVID-19, with the “surprise decision” being handed down yesterday.

It now means paths the way for businesses to claim on their business insurance policy for COVID-19 pandemic-related losses, after certain insurers adopted the position that they would not cover such losses. This Court’s decision now could mean that these insurers may have to pay out thousands of pandemic-related business interruption claims.

The Court was asked to consider whether a certain insurance policy covered a business for COVID-19 pandemic related losses if they held appropriate business interruption insurance. The policy in question stated:

“The cover … does not apply to any circumstances involving ‘Highly Pathogenic Avian Influenza in Humans’ or other diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments.”

In this decision, the Court declared that “COVID-19 is not a disease declared to be a quarantinable disease under the Quarantine Act 1908 (Cth), and the exclusion in the [insurer’s policy] is not enlivened.” In other words, it does not relate to COVID-19 because that particular Act is no longer in existence.

It is now apparent that the insurance companies inadvertently did not amend their insurance policies to use the appropriate legislation.

While it may seem like somewhat of a technicality, the Court found that the insurance policies referred to “the Australian Quarantine Act 1908 (Cth)”, an act that was repealed back in the 2016 and replaced by the Biosecurity Act 2015 (Cth). The Court found that the Biosecurity Act did not provide for declarations of quarantinable diseases by the Governor-General. Instead, the Director of Human Biosecurity was able in certain circumstances to determine a disease to be a “listed human disease”. Before the repeal of the Quarantine Act, COVID-19 was not declared to be a quarantinable disease. On January 21, 2020, COVID-19 was determined to be a listed human disease under the Biosecurity Act.

In short, the Court held that details, and the use of correct legislation in insurance policies must be correct in order for such “pandemic” exemptions apply.

Whilst it is expected that the Insurance Council of Australia will consider appealing to the High Court of Australia, it is worthwhile for all of our clients looking into whether their business interruption insurance policies are worded in a way that the Court considered as not properly drafted to allow for coverage of COVID-19.

The insurance industry is now bracing for millions of dollars being claimed by their clients as a result of this decision.

If you wish to discuss this matter with us, please do not hesitate to contact Kathryn Adams on or call 0452 624 454.