Victoria has gone into lockdown several times. Can the suspended businesses make business interruption insurance claims?

Victoria has entered its sixth lockdown of the pandemic in August, forcing many businesses to close again. In Victoria, many businesses take out the Business Interruption Insurance,  when they run a business. This insurance generally covers the risk of loss caused by the temporary interruption of the investor’s business due to environmental risks, including fire, flood, building collapse and other unexpected economic losses. However, under the sudden and continuous impact of the epidemic, are businesses which are forced to suspend business or suffer losses able to make business interruption claims from their insurance companies? Let’s take a look at the recent cases of business interruption insurance claims due to COVID-19.




In the last year’s case of HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296, the insurer refused to compensate insured persons for business disruptions caused by COVID-19. The two sides had made no progress after mediation. Subsequently, the insured party lodged a complaint against the Insurer with the Australian Financial Complaints Authority (‘AFCA’). Due to the large number of people involved, the case was heard in the NSW Court of Appeal as the “first test case”. The key issue in the case is whether the insurer can rely on a specific clause in the contract to avoid liability for business interruption caused by COVID-19. Such clause reads as follows:

“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. The coverage does not cover pathogenic avian influenza or quarantinable infectious diseases included in Australia’s Quarantine Act or subsequent amendments.”

The Australian Quarantine Act 1908 (Cth) was repealed and replaced by the Biosecurity Act 2015 (Cth) in 2016. Under the new ‘Biosecurity Act’, COVID-19 is defined as a quarantinable infectious disease. After all, can the new Act be considered by the courts as a ‘subsequent amendment’ to insurance contracts and exempt insurers from COVID-19-related payouts?



The Outcome of the First Test Case

In the first trial, the NSW Courts held that:

The insurance company cannot refuse the insured party’s claim under the above clauses. The reasoning is that the Court held that the Biosafety Act was new and unrelated to the previous quarantine act, in other words, it did not fall under the definition of a ‘subsequent amendment’ under the contract, and thus could not effectively exclude the impact of COVID-19 from insurance coverage.

The insurer then appealed the trial court’s decision to the High Court of Australia, which had subsequently denied the appeal. This indicates that , the insurer is still liable to compensate the insured for the business interruptions caused as a result of the pandemic even if the insurance policy includes such a provision above.



The Impact of the First Test Case

Is the decision of the test case applicable to NSW insurers only, or is it legally binding on the insurers in Victoria as well? As the High Court of Australia had denied the appeal, , the judgment of the first test case will  also be legally binding on insurers in Victoria and other States and Territories although the case was heard in NSW.



The Second Test Case

It is worth noting that, due to the widespread impact of the epidemic, the judgment of the first test case cannot completely resolve all the disputes of making the claim for Business Interruption Insurance due to the epidemic. There is still a need for a clearer definition of some wording in the business interruption insurance contract, as well as the specific scope of coverage of the claim. As a result, some insurers have initiated proceedings in the Federal Court of Australia which has be recognised as the ‘second test case’. The second test case includes numbers of major insurers such as Allianz, IAG, Chubb, Guild and SwissRe Corporate Solutions, and the claims therein are related to a wide range of industries and locations.


Currently, the second test case is still in the process of hearing, and the final outcome of the trial is likely to provide clear legal definitions and guidelines for determining whether the insured companies may make the business interruption insurance claims if their businesses were disrupted by the pandemic.



For those who have had their business suspended due to the pandemic lockdown, what can they do at the moment?

Although the second test case is still in process, it does not affect the insured to make the application for the business interruption insurance claims. If your insurance policy is similar with the one in the first test case, you claim may be awarded. If the terms of the insurance policy your business have entered into are similar to those in the second test case, we anticipate that the insurance company may respond based on your specific circumstances after the final outcome of the second test case. If your business is covered by the business interruption insurance and  suspended due to the lockdown of the pandemic, we strongly recommend you  to consult our lawyer and make the application for the business interruption insurance claim in writing as soon as possible.



There is no doubt that the business suspension caused by the epidemic has affected many businesses, especially small and medium-sized enterprises. We also hope that the court can give a fair explanation and guidance as to the disputes over the business interruption insurance  claim. If you have any needs and enquiries regarding insurance claims, please do not hesitate to consult our experienced lawyers and we will do our best to maximise your interests.


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