Earlier today, a combined test case to consider the application of an infectious disease exclusion in business interruption policies, was filed in the Supreme Court of New South Wales. The combined test case is supported by the Insurance Council of Australia (ICA) and the Australian Financial Complaints Authority (AFCA). Clyde & Co partners Gareth Horne and Avryl Lattin are acting for the test case insurers in the proceeding, and representing the interests of the ICA and its members.
The combined test case has been commenced by two plaintiff insurers, HDI Global Specialty SE (Australia) and The Hollard Insurance Company, seeking declarations with respect to policy construction. Two insureds have committed to participate in the test case as the contradictors, and will be represented by Clayton Utz. The process has been endorsed by AFCA pursuant to AFCA's Complaint Resolution Scheme Rules. Avryl Lattin stated that "the combined test case is the product of close cooperation and constructive discussion between the ICA, AFCA and other regulators, as well as the insurers and insureds concerned".
The case will look at whether the infectious diseases exclusion in question can be relied upon as a result of COVID-19 being declared a listed human disease under the Biosecurity Act 2015 (Cth). AFCA has agreed to follow the reasoning of any final judgment in the combined test case when determining other complaints before it in respect of business interruption claims with a similar infectious diseases exclusion.
Gareth Horne said "it is important that this key threshold coverage question is addressed swiftly and definitively, with a view to giving certainty for all stakeholders including both small businesses and insurers".