Quarantine act test case

Application to the High Court

Application for special leave to the High Court of Australia to appeal the decision of the New South Wales Court of Appeal regarding the application of the Quarantine Act exclusion

Media Release

Insurers to appeal to High Court regarding business interruption policies

Frequently Asked Questions

  • Why is the Test Case considering the Quarantine Act carve-out

    Business interruption cover may exclude cover for infectious diseases that are quarantinable diseases declared under the Quarantine Act 1908 and subsequent amendments. In 2016, the Quarantine Act was repealed and substantially replaced with the Biosecurity Act 2015. COVID-19 was determined to be a listed human disease under the Biosecurity Act on January 21, 2020.

  • Who is running the Test Case?

    Under AFCA Rules, insurers can request that AFCA allow a complaint to be decided by the courts rather than AFCA. To ensure certainty as to the application of the Quarantine Act carve-out, the Insurance Council of Australia and AFCA agreed to file a test case considering the application of this exclusion to business interruption cover.

    The Test Case involves two policies that exclude loss arising from infectious diseases as defined by the Quarantine Act. The Plaintiffs are the two insurers who issued the policies. The Defendants are two business customers who were issued with one of the policies.

    The Insurance Council of Australia is funding the legal costs for all parties involved in the Test Case.

  • When will the outcome of the Test Case be known?

    The Board of the Insurance Council of Australia (ICA) has agreed that an application for special leave is to be made to the High Court of Australia to appeal the decision of the New South Wales Court of Appeal regarding the application of the Quarantine Act exclusion to business interruption policies.  

    There will be a final resolution of the Test Case:

    • - the application for special leave to appeal is refused by the High Court; or
    • - special leave to appeal is granted and the High Court hears the appeal and delivers its judgment on the appeal.
  • The Test Case has been decided in favour of insureds, when will my claim be paid?

    When there is a non-appealable final resolution of the Test Case, insurers will be in a position to advance their assessment of claims which involve a Quarantine Act carve-out.

    Even once the Test Case is determined, your insurer may require additional information from you to finalise the assessment of your claim. If this is the case, your insurer will contact you to ask for the specific information that you will have to provide to substantiate any claim you have submitted.

    If you have any specific questions about the status of your claim, you should speak to your broker or insurer.

  • Can I still make a claim while the Test Case is running?

    Yes, if you have business interruption cover, you can lodge a claim with your insurer while the Test Case is running.

  • What will be the status of my claim while the Test Case is running?

    If your business interruption cover contains a Quarantine Act carve-out, insurers will await the final resolution of the Test Case before considering how the Quarantine Act carve-out will apply to your claim.

    Once there is a final resolution of the Test Case, insurers will assess claims that contain a Quarantine Act carve-out on a case-by-case basis. 

  • Can I make a complaint to AFCA while the Test Case is running?

    Yes, you can make a complaint to AFCA, provided you are eligible to do so.

    If your complaint relates to a policy that contains a Quarantine Act carve-out, AFCA has agreed to await the final resolution of the Test Case before considering how the Quarantine Act carve-out will affect your complaint.

  • How is the outcome of the Test Case likely to affect my claim?

    If the final resolution of the Test Case is that the Quarantine Act carve-out applies to COVID-19, then cover will not be available under an infectious diseases benefit for losses arising from COVID-19 where the policy contains a Quarantine Act carve-out. It will depend on the terms of your policy whether you may have a claim under another part of the policy.

    If the final resolution of the Test Case is that the Quarantine Act carve-out does not exclude COVID-19, then cover may potentially be available under an infectious diseases benefit for loss arising from COVID-19, subject to satisfaction of other policy trigger requirements and proof of loss. In these circumstances, your insurer will probably need further information from you to assess your claim, including:

    • - Whether an outbreak of COVID-19 has occurred in the vicinity or a specified radius of your business
    • - How your business has been affected financially by COVID-19
    • - The cause of any financial loss to your business, and
    • - The details of the loss claimed.

    Your insurer will contact you to ask for the specific information that you will have to provide to substantiate any claim you have submitted.

  • If my claim was previously declined, will the Test Case change this?

    If the final resolution of the Test Case is that the Quarantine Act carve-out does not exclude COVID-19, then your claim may need to be reassessed and cover may potentially be available under an infectious diseases benefit for loss arising from COVID-19.

    In these circumstances, your insurer may contact you or your broker to discuss the process for reassessing your claim.

  • My business is not in NSW. Will the Test Case affect my claim?

    Insurers and AFCA have agreed to follow the final determination of the Test Case when considering similar claims made by customers in other states and territories.

    As the judgment of the New South Wales Court of Appeal is being appealed to the High Court of Australia, if leave to appeal is granted any decision will be binding on courts in all States and Territories.

  • How will the UK Test Case affect Australian claims?

    The Financial Conduct Authority commenced a test case in the United Kingdom in June 2020 to assess how insurance policies issued in the UK may respond to COVID-19 related claims (FCA Test Case). The High Court of England and Wales recently issued its decision. This decision is now the subject of appeals in the UK Supreme Court.

    Though the UK Test Case decision may provide some guidance in Australia, it is not binding on Australian courts or insurers. The UK case examined different issues to the Australian test case because UK policies have different policy wordings to policies issued here. It is also important to recognise that the COVID-19 situation is different between the UK and Australia, including the number of infections and the responses of governments.

  • I have been financially impacted by COVID-19. Are support measures available?

    Insurers are committed to assisting their customers, including those experiencing financial hardship through the COVID-19 crisis. Insurers are providing a range of relief and support measures, packages and case-by-case assistance.

    If you would like to find out more about support measures that may be available, you should speak to your broker or insurer. The Insurance Council of Australia has also published information on how COVID-19 may affect your insurance policies: https://www.insurancecouncil.com.au/issues-submissions/covid-19.

  • What does this mean for my claim?

    As we are still waiting for a final resolution of the First Test Case there is no change to the status of your claim.

  • Why is the first test case being appealed?

    While the insurance industry is sympathetic to businesses, particularly small and medium enterprises, that have experienced hardship as a result of COVID-19 restrictions, it remains of the view that pandemics were not contemplated for coverage under most business interruption policies and that the Quarantine Act exclusion excludes COVID-19 related claims.

    Premiums were not collected to reflect the cost of cover for pandemics and reinsurance was not generally available for pandemic cover, nor were reserves established for pandemic-related claims. Where appropriately priced business interruption policies were designed to cover pandemics (predominantly in the entertainment and health sectors) claims have already been paid out.

    While it is unfortunate that some policies were not updated to refer to the legislation that replaced the Quarantine Act, the decision of the Court of Appeal, if implemented, would mean policyholders with an updated and correct legislative reference would not be eligible to claim under their business interruption policies for COVID-19 related claims, while those whose policy incorrectly referenced the Quarantine Act would.

    For the industry to remain fair and sustainable for all customers over the long term, it cannot pay claims for events that customers have not actually paid premiums to cover.

    The insurance industry recognises the importance of seeking clarity on the interpretation of further aspects of business interruption policies and is working with stakeholders and policyholders to provide a resolution as quickly as possible.

  • When will it happen?

    The option for an appeal by either the insurers or the insured was agreed to in the original decision to seek an outcome from the courts. If special leave to appeal is granted, the ICA would seek for the matter to be heard in the High Court as quickly as possible.

  • What will happen to my complaint to AFCA?

    If your complaint relates to a policy that contains a Quarantine Act carve-out, AFCA has agreed to await the final resolution of the Test Case (i.e. a decision by the High Court) before considering how the Quarantine Act carve-out will affect your complaint.

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