On 14 October 2022, the High Court of Australia rejected the applications by policyholders for special leave to appeal the decision issued by the Full Federal Court of Australia on 21 February 2022 in well-known COVID-related business interruption cases.
The High Court’s ruling on these matters draws to a close the judicial process that has led to the elaboration of the business interruption tests. As a consequence, insurers must determine claims for COVID-19 business interruption based on the principles set out in the Second ICA Test Case Appeal, the First ICA Test Case and the wording of the policy in question.
In particular, on the one hand, the First ICA Test Case – as elaborated by the High Court in a decision of 25 June 2021 – established that insurers could not rely on references to the Quarantine Act “and subsequent amendments” in policies to exclude COVID-19 related claims. On the other hand, based on the Second ICA Test Case, the Federal Court of Australia found that: (i) government orders to avert the spread to the pandemic do not satisfy “Disease” and “Hybrid” clauses in insurance policies; (ii) where a policy contains an insuring clause which refers expressly to disease and an insuring clause directed to more general matters, such as “threat of damage” or “risk to life” (‘prevention of access clause’), the more general clauses do not cover for business interruption due to disease; and (iii) ‘catastrophe clauses’ do not provide cover for business interruption caused by COVID-19.
Based on the above, insurers and insureds now possess all the elements to correctly manage claims related to business interruptions caused by the spread of the pandemic.