Small businesses have been fighting insurers for payouts for COVID-related losses for the entire pandemic and in October 2021, and a test case of the matter in the Federal Court was largely hailed as a win for the insurance industry’s position that it was not obliged to pay out COVID-related losses.
The court ruling then found a range of insurance policies did not cover small businesses for financial losses during COVID.
It found that the majority of nine business interruption (BI) policies put before it for scrutiny would not need to be paid out by the insurers.
On Monday (21 February), an appeal into that matter was handed down in a long and complicated decision. A summary indicates it largely upholds the October outcome.
It is estimated there were roughly 250,000 policies taken out in early 2020 with a total potential liability of $10 billion.
But insurance giants said they never intended for these sorts of policies to cover pandemics.
Maurice Blackburn principal lawyer Josh Mennen said the latest legal outcome was not good for small businesses awaiting an insurance payout.
“There is still the prospect of a High Court appeal, but for many insured businesses the outlook is now more pessimistic,” he said.
“The upshot for insured businesses is that COVID-related business interruption claims will be very difficult to substantiate.
“This is a further blow for the thousands of insured businesses who suffered during pandemic closures.”
The Insurance Council of Australia (ICA), said business owners’ claims were still being determined based on the final applicable principles of both test cases.
“These matters are not clear cut and we acknowledge that this has been a long but necessary process that will ultimately provide important guidance on how business interruption policy wordings are to be interpreted and applied,” ICA chief executive Andrew Hall said.
