The impact of Covid-19 on the global insurance industry – Australia

Australia

General questions

Yes/ No/  N/A

Additional comments, if any.

1

Does the country that you are reporting on follow common law jurisprudence?

Yes

2

If the answer to the above question is no, does the country you are reporting on follow a civil code? Please describe the judicial system in short.

N/A

3

Please provide a brief description of the legal framework applicable to insurance coverage disputes in the country you are reporting on. In so doing, please consider the following questions:

Insurance coverage disputes are resolved by state and federal courts, or by alternative dispute resolution agreed between the parties. There are also external dispute resolution forums (eg, the Australian Financial Complaints Authority) to which certain disputes with insurers can be submitted. Contracts of insurance are governed by the law of contract, as amended by statute. Importantly, a number of common law principles are amended by the Insurance Contracts Act 1984 (Cth) for certain contracts of insurance to which that legislation applies.

4

Does the insured bear the burden of establishing coverage of a claim, or does the insurer bear the burden of establishing no coverage? Please give a short description of the legal basis in your country.

The insured bears the burden of establishing coverage of a claim – proving that its loss falls within the scope of the policy: see Munro Brice & Co v War Risks Assoc Ltd [1918] 2 KB 78 for the general principal still applied in Australia.

Generally, the insured must establish: (1) an event (peril) defined by the policy has occurred; (2) the event occurred within the period of cover; and (3) the event was the proximate cause of the loss. For third party liability policies, the insured must similarly prove a claim has been made against it, and that its claim is otherwise covered by the policy.

Once the insured has established coverage, the burden shifts to the insurer to establish any available defence or exclusion under the policy: see, eg, McLennan v Insurance Australia Ltd (2014) 313 ALR 173.

Insurance contracts are subject to the same rules of interpretation, subject to common law rules and legislation, as any other written contract: see Australian Casualty Co Ltd v Federico (1986) 160 CLR 513.

5

Are coverage provisions in policies interpreted broadly or is there a presumption in favour of coverage? Please give a short description of the legal basis in your country.

The policy is to be given a business-like interpretation, paying attention to the language used by the parties in its ordinary meaning, and to the commercial, and where relevant, the social purpose and object of the contract, in the context of the surrounding circumstances, including the market or commercial context in which the parties are operating, by assessing how a reasonable person in the position of the parties would have understood the language. Preference is to be given to a construction supplying a congruent operation to the various components of the whole: Todd v Alterra at Lloyds Ltd (on behalf of the underwriting members of Syndicate 1400) [2016] FCAFC 15; (2016) 239 FCR 12 at [42].

If a word or phrase in the policy has two meanings, it will usually be interpreted in favour of the insured, but the word or phrase must be ‘intractably ambiguous’: Johnson v American Home Assurance (1998) 192 CLR 266.

6

Are exclusions interpreted narrowly or is there a presumption against finding that an exclusion to coverage applies? Please give a short description of the legal basis in your country.

An exclusion clause is also construed according to its natural and ordinary meaning, read in light of the contract as a whole. Where there is ambiguity as to the meaning of an exclusion clause it will be read contra proferentem, meaning strictly against the insurer: see, eg, Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541; Alex Kay Pty Ltd v General Motors Acceptance Corp & Hartford Fire Insurance Co [1963] VR 458.

7

Are there universally accepted definitions for:

• event
• occurrence
• damage
• cause
• originating cause
• natural peril
• force majeure
• loss
• consequential loss

If the answer is yes, please give a short description of each definition and the legal basis for that definition (ie, a rule of law, case law etc).

Generally, there are no universally accepted definitions for these terms. They will usually be defined in the policy, and may differ between insurers.

Nevertheless, there can be some consistency in the language used to describe these terms across different policies. For example, an ‘occurrence’ might typically be defined in public and product liability policies as ‘an event including continuous or repeated exposure to substantially the same general conditions which results in personal injury or property damage neither expected nor intended from the standpoint of the insured.’

Where terms have similar definitions across the policies of different insurers, this is usually a matter of market practice, but may be informed by case law.

There are bodies of law on some of these terms (eg, originating cause and consequential loss), but the jurisprudence is usually developed in the course of interpreting the concepts in the context of a particular contract.

Loss causation

Yes/No/ N/A

Additional comments, if any.

8

Did the country that you are reporting about issue lockdown, stay-at-home, or no-travel restrictions in response to Covid-19?

Yes

See below.

9

If the answer to the question above is yes, were such orders issued nationally, by state/region or by local city/town. Please give a short description of the issuing authority and the orders issued.

The Commonwealth and individual state governments of Australia each issued restrictions.

The key restrictions imposed by the Commonwealth government were:

• 16 March 2020 – foreign cruise ships were banned from arriving in Australia;
• 20 March 2020 – Australia closed its borders to non-citizens and non-residents; and
• 25 March 2020 – Australian citizens or permanent residents were banned from leaving Australia without an exemption.

State governments each imposed their own restrictions from March 2020 onwards. These included:

• bans on gatherings;
• closure of non-essential businesses (eg restaurants, bars, gyms);
• stay-at-home directions;
• closure of state borders;
• social distancing requirements; and
• quarantine and isolation requirements.

These orders were generally made by the state’s chief health officer, who had the powers to make the various directions under the state’s public health legislation.

10

If the answer to the above question is yes, were the lockdown, stay-at-home or no-travel restrictions mandatory or recommended?

The restrictions identified above were mandatory and punishable by fines if not complied with.

11

If the country that you are reporting about did issue lockdown, stay-at-home or no-travel restrictions, were those orders suspended or revoked at any point in time? If the answer is yes, please give a short description of the timeline.

In relation to the Commonwealth government’s restrictions:

• the ban on foreign cruise ships remains in place;
• from 1 November 2021, fully vaccinated Australians are permitted to travel abroad; and
• from 1 December 2021, full vaccinated eligible visa holders can travel to Australia, subject to state government restrictions. For example, Queensland has quarantine requirements until the population reaches a 90 per cent vaccination rate.

In relation to state government restrictions:

• the restrictions commenced from mid to late March 2020 in response to the ‘first wave’;
• the restrictions began to be eased from around May 2020;
• restrictions then varied depending on state. A ‘second wave; commenced in June 2020. Victoria experienced a strict lockdown in June 2020 until November 2020. In comparison, restrictions in Queensland had largely lifted by October 2020. Restrictions began to ease again in December 2020;
• in June 2021, a ‘third wave’ commenced as the Delta variant resulted in large outbreaks in New South Wales (NSW) and Victoria. NSW was subject to lockdowns from June 2020 to October 2020, when restrictions eased, mostly for the fully vaccinated;
• throughout the above period, various lockdowns occurred in response to new outbreaks. For example, South East Queensland went into a snap three-day lockdown on 31 July 2021;
• in December 2021, a ‘fourth wave’ commenced with the Omicron variant. At the date of preparing this questionnaire, the states are reviewing previously relaxed restrictions.

12

If the answer to the above question is yes, were subsequent lockdown, stay-at-home or no-travel restrictions issued at any point in time? Please give a short description of the timeline.

Yes

See above.

13

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss?

Yes

On 8 October 2021, Justice Jagot delivered a judgment in Swiss Re International Se v LCA Marrickville Pty Limited (Second COVID-19 insurance test cases) [2021] FCA 1206.

This case was a ‘test case’ commissioned pursuant to the rules of the Australian Financial Complaints Authority, which is an external dispute resolution scheme for consumers.

The judgment concerned the interpretation of insurance policies for business interruption caused by the Covid-19 pandemic.

Whether Covid-19 was a ‘cause’ of business interruption loss depends on the particular wording in the policy. For example, a policy that covers business interruption due to the outbreak of a disease within a 20-kilometre radius of the premises, the Court found that the outbreak could be a proximate cause of the loss (eg, a restaurant that suffers a decline in walk-in trade).

14

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss? If the answer is yes, please give a short description of the conclusions in the judicial opinions or guidance.

No

An appeal of the above matter was heard by the Full Federal Court of Australia between 8 and 12 November 2021. Judgment is expected in early 2022. Any appeal to the High Court (Australia’s highest court) will be heard in 2022.

15

If the answer to the question above is yes, did the highest court in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by the virus? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

16

If the answer to the above question is no, did the highest court in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by government lockdown or stay-at-home orders? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

17

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss? If the answer is yes, please give a short description of the conclusions in the judicial opinions or guidance.

Yes

In Swiss Re International Se v LCA Marrickville Pty Limited (Second COVID-19 insurance test cases) [2021] FCA 1206, Jagot J differentiated between the actions made by the state and federal governments in relation to the insured peril.

Her Honour held that the cause of the state government action was the existence of Covid-19 cases in the state (known) and the associated threat or risk of Covid-19 to persons (from cases both known and unknown) across the state as a whole ([76] - [83]).

Her Honour held that the cause of the Commonwealth government action was the presence of Covid-19 overseas and the risk that an overseas traveller coming to Australia may bring Covid-19 into any part of Australia ([487] - [488]).

These distinctions were important to her Honour as it formed the basis for her view that, on the cases before her Honour, while it is possible there was an outbreak, that outbreak could not be said to be a ‘proximate cause’ of the government orders.

18

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss, have other courts in the country issued such opinions?

No

19

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether Covid-19 is a ‘cause’ of insured loss? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

20

If the answer to the above question is yes, do courts in the country you are reporting about hold that losses related to Covid-19 were ‘caused’ by the virus? Please give a short description of the conclusions in the judicial opinions or guidance.

Yes

See the response to Question 17 (above).

21

If the answer to the above question is no, do courts in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by government lockdown or stay-at-home orders? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

22

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss?

No

23

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss, have other courts in the country issued such opinions? If yes, please give a short description of the conclusions in such judicial opinions or guidance.

N/A

24

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’?

Yes

 In Swiss Re International Se v LCA Marrickville Pty Limited (Second COVID-19 insurance test cases) [2021] FCA 1206, Jagot J analysed four broad types of insuring clauses to determine whether there was coverage for the individual circumstances of Covid-19 in each of the ten cases and their individual insuring clauses.

Broadly, the insuring clauses were:

1. infectious disease clauses, which provide cover from loss that arises from either infectious diseases or the outbreak of an infectious diseases at an insured’s premises or within a specified radius of an insured’s premises;
2. prevention of access clauses, which provide cover for loss from orders/actions of a competent authority preventing or restricting access to insured premises because of damage or a threat of damage to property or persons (generally within a specified radius of the insured premises);
3. hybrid clauses, which provide cover for loss from orders/actions of a competent authority closing or restricting access to premises where the orders/actions are made or taken as a result of infectious disease or an outbreak of infectious disease within a specified radius of an insured’s premises; and
4. catastrophe clauses, which provide cover for loss resulting from the action of a civil authority during a catastrophe for the purpose of retarding the catastrophe.

Her Honour found that, other than in one case (Meridian Travel), the insuring clauses did not apply in the circumstances of each case. This was based largely on two findings: (1) that it would be ‘incongruent’ to read prevention of access clauses as being applicable to infectious diseases where the policy already contains a clause which deals specifically with diseases (an infectious disease clause); and (2) a factual finding that even if there was an ‘outbreak’ of Covid-19 within the radius of an insured’s premises, on the facts before her Honour, it could not be said that the outbreak within the radius was a cause of the government orders.

As to Meridian Travel, the infectious disease clause was triggered but Meridian failed on causation as (on the evidence before the Court) the sole cause of its loss was the interruption and interference to its business as a result of the Commonwealth government’s action to ban cruise ships from Australia and ban/restrict international travel to and from Australia. This was a different cause from the insured peril which requires the outbreak of the disease to occur within a 20-kilometre radius of the insured’s premises.

As stated above, an appeal of the matter was heard in November 2021 by the Full Federal Court of Australia (the intermediate court) and judgment is expected in early 2022.

25

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’? Please give a short description of the conclusions in the judicial opinions or guidance.

No

26

If the answer to the question above is yes, did the highest court in the country you are reporting about determine that losses related to Covid-19 were covered ‘events’? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

27

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’, have other courts in the country issued such opinions?

Yes

Other than Swiss Re International Se v LCA Marrickville Pty Limited (Second COVID-19 insurance test cases) [2021] FCA 1206 (discussed above) and HDI Global Specialty SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296 (discussed below in Question 55), there have been other judgments regarding whether or not Covid-19 engages various insuring clauses.

First, in Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance [2020] FCAFC 228, the Full Court of the Federal Court of Australia considered whether a Biosecurity Act exclusion in a disease clause (discussed below in Question 55) would be sufficient to deny cover to an insured with a disease clause containing such an exclusion. The exclusion did not specifically refer to a ‘listed human disease under the Biosecurity Act’ (which Covid-19 was declared as; see the response to Question 54 below) but rather ‘any biosecurity emergency or human biosecurity emergency declared under the Biosecurity Act’. The Court gave the exclusion a broad interpretation and held that the causal factor that will trigger the exclusion clause is the emergency or the circumstances giving rise to the emergency, albeit that the emergency takes ‘the form of a human disease’ which must be of ‘such seriousness that it becomes the subject of a declaration’ under section 475 of the Biosecurity Act (which Covid-19 was on 18 March 2020).

Second, in Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907, the Federal Court (at first instance) dismissed a claim made by Star Entertainment Group for business interruption losses under an industrial special risks policy. The matter concerned a catastrophe clause (discussed above) and an extension which covered ‘loss resulting from or caused by any lawfully constituted authority in connection with or for the purpose of retarding any conflagration or other catastrophe.’ Star submitted that a ‘conflagration or other catastrophe’ is a sudden and widespread disaster and is not limited to fire, flood or earthquake. They submitted that the Covid-19 pandemic is a ‘catastrophe’ and the government orders were the conduct of lawfully constituted authorities to retard that catastrophe.

The insurers argued that the object of the policy was to provide indemnity for various perils that cause physical loss, destruction or damage to real and personal property of the insured. As the government action did not cause any physical loss and destruction to the insured property, the extension did not apply.

Chief Justice Allsop found that the extension was not engaged and largely agreed with the insurer’s interpretation. However, his Honour did consider that if he was wrong regarding the extension not being engaged that the evidence showed that Covid-19 was, at the relevant time, a global catastrophe with at least an incipient existence in Australia and remarked that the ‘pandemic and the response thereto could not be disentangled.’ His Honour also accepted that if he was wrong that the actions of the government were carried out in connection with, or for the purpose of, retarding (incipient) domestic catastrophe.

Star appealed and the Star Entertainment matter was heard with the Second COVID-19 Insurance Test Cases in the Full Court of the Federal Court in November 2021.

28

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether Covid-19 is a covered ‘event’? Please give a short description of the conclusions in such judicial opinions or guidance.

Yes

On the whole, the courts have generally found that on the insuring clauses before it, the insuring clauses are not engaged in the circumstances of each case as a result of Covid-19, although noting that the insuring clauses that the courts have considered to date have generally been narrow.

However, there is not yet finality on this issue as the Australian appellate courts are yet to develop the jurisprudence. Currently, the general interpretation of the courts, as discussed above, is that whether or not Covid-19 is covered by the insuring clause will depend on the circumstances of each insured and the wording of their policy. As stated above, on the current state of the law, for a policy that covers business interruption due to the outbreak of a disease within a 20-kilometre radius of the premises, Jagot J in the Second COVID-19 Insurance Test Cases found that the outbreak could be a proximate cause of the loss (eg, a restaurant that suffers a decline in walk-in trade).

29

If the answer to the above question is yes, do courts in the country you are reporting about hold that losses related to Covid-19 are covered ‘events’? Please give a short description of the conclusions in the judicial opinions or guidance.

No

See the responses at questions 24 and 27 above.

30

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 in the context of loss causation.

No

Aggregation of claims

Yes/No/ N/A

Additional comments, if any.

31

Does the country you are reporting on permit aggregation of claims arising out of a single originating cause? Please give a short description of the legal basis.

Yes

See below.

32

Does the country you are reporting on permit aggregation of claims arising out of a single cause? Please give a short description of the legal basis.

Yes

Aggregation of claims arising from the same occurrence is permitted, when there is a clause to that effect in the policy. Policies can also allow the treatment of multiple insured events or claims as single ones for the purpose of claims.

An aggregation clause will usually have one of three main functions: (1) defining temporal coverage; (2) determining how many deductibles apply; and (3) determining the limit of cover under the policy.

A policy may contain an aggregation clause which allows for a series of occurrences to be aggregated into (or deemed) one occurrence under the policy if the series is attributable to ‘one source or original clause’: Tokio Marine Europe Insurance Ltd v Novae Corporate Underwriting Ltd [2014] EWHC 2105. Accordingly, claims originating from a single originating cause can be aggregated, applying the proximate cause test.

33

Does the country you are reporting on permit aggregation of claims arising out of a single event? Please give a short description of the legal basis.

Yes

See above.

On a first principles basis, occurrence and event are interchangeable terms and usually have the same meaning.

34

Does the country you are reporting on use an accepted test for determining whether claims can be aggregated? For example, does the country you are reporting on apply to four unities test to determine whether aggregation is appropriate? Please give a short description of the legal basis.

There is no universally accepted test, it will largely depend on the wording of the policy.

We are not aware of the Australian courts having considered (and adopted or rejected) a ‘four unities’ test for aggregation of claims that arise out of a single occurrence, such as that contemplated in Scott v Copenhagen Reinsurance Co (UK) Ltd [2003] Lloyd’s Rep IR 696.

However, in construing the language of aggregation clauses in policies, there may be consideration of unifying factors. For example, a clause may aggregate occurrences attributable to ‘one source or original cause’ and part ‘of a series’ because they had some characteristics in common which followed one another in temporal succession: Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR. Similarly, multiple single claims have been aggregated based on interpretation of the policy wording where a key factual component was a ‘unifying factor’ between all of the claims: Bank of Queensland Limited v AIG Australia Limited [2019] NSWCA 190.

The language of the policy will determine the aggregation of claims, with clauses which aggregate based on an underlying or originating cause generally having a broader aggregation effect than those which are event or act based: Bank of Queensland Limited v AIG Australia Limited [2019] NSWCA 190 at [14].

35

Have courts in the country you are reporting on issued jurisprudence concerning whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the legal basis.

No

36

Has the highest court in the country you are reporting about issued judicial opinions or guidance concerning whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

37

If the answer to the question above is yes, did the highest court in the country you are reporting about determine whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

38

If the highest court in the country you are reporting on has not issued such jurisprudence, have other courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether insureds may aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

39

If the answer to the above question is yes, do courts in the country you are reporting about permit insureds to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

40

Do the courts in the country you are reporting on permit an insured to aggregate claims related to multiple properties or business locations arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

This issue has not been the subject of judicial consideration.

41

Do the courts in the country you are reporting on permit an insured to aggregate claims related to multiple lockdown or stay-at-home orders arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

This issue has not been the subject of judicial consideration.

42

Have courts in the country you are reporting on issued jurisprudence concerning whether cedents can aggregate claims arising out of Covid-19? Please give a short description of the legal basis.

No

43

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether cedents may aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

44

If the answer to the above question is yes, do courts in the country you are reporting about permit cedents to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

This issue has not been the subject of judicial consideration.

45

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 and aggregating claims.

N/A

Property damage

Yes/No/ N/A

Additional comments, if any.

46

Have courts in the country you are reporting on issued jurisprudence concerning whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the legal basis.

The Federal Court also considered the issue in Star Entertainment Group Ltd v Chubb Insurance Ltd [2021] FCA 907 – business interruption test case referenced above. Chief Justice Allsop found that Covid-19 was not an insured catastrophe capable of causing physical damage. Cover was denied under the relevant policy on the basis that the losses suffered were not caused by physical loss, destruction or damage to property.

47

Has the highest court in the country you are reporting about issued judicial opinions or guidance concerning whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the conclusions in such judicial opinions or guidance.

No

48

If the answer to the question above is yes, did the highest court in the country you are reporting about determine whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

49

If the highest court in the country you are reporting on has not issued such jurisprudence, have other courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether losses arising from Covid-19 constitute property damage? Please give a short description of the conclusions in such judicial opinions or guidance.

There has been little consideration of this issue, however commentary suggests that Covid-19 may not qualify as physical loss or damage.

50

If the answer to the above question is yes, do courts in the country you are reporting about permit insureds to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

51

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 and property damage.

N/A

Exclusions

Yes/ No/  N/A

Additional comments, if any.

52

Has Covid-19 been deemed a ‘natural peril’ in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

No

53

Has Covid-19 been deemed force majeure in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

No

54

Is Covid-19 acknowledged as a notifiable disease in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

Yes

On 21 January 2020, Covid-19 legislatively became a ‘listed human disease’ under the Biosecurity Act 2015 (Cth).

55

Is it common for insurance policies issued in the country you are reporting on to include a pandemic or virus exclusion? Please give a short description of the legal basis and common insurance practice.

Yes

Business interruption policies which contain a ‘disease clause’ (such as cover ‘against the outbreak of an infectious or contagious human disease’) generally, also contain an exclusion which excludes cover for diseases under certain pieces of legislation. When Covid-19 first appeared in Australia, as stated above, it legislatively became a listed human disease under the Biosecurity Act.

However, many insurance policies which contained a disease clause contained an exclusion which referred to the Quarantine Act 1908 (Cth) ‘and subsequent amendments’ and not the Biosecurity Act. The Quarantine Act was repealed in 2016. The Biosecurity Act was the relevant Act which from that point on dealt with infectious diseases. This meant that policyholders were prima facie covered under the disease clause (which contained the Quarantine Act exclusion) for an outbreak of Covid-19.

The ‘first test case’ dealt with an issue raised by insurers as to whether exclusions in disease clauses which referred to the Quarantine Act should be read as Biosecurity Act on the basis that Biosecurity Act was a ‘subsequent amendment’ to the Quarantine Act. That case was HDI Global Specialty SE v Wonkana No 3 Pty Ltd [2020] NSWCA 296. The matter was heard directly by the New South Wales Court of Appeal in a specially convened bench of five judges. All five judges unanimously dismissed the insurers’ case on the basis that the words ‘and subsequent amendments’ do not extend to or include the Biosecurity Act (which is a separate Act). The insurers then sought special leave to the High Court of Australia to appeal that decision. Special leave was denied: HDI Global Specialty SE v Wonkana No 3 Pty Ltd [2021] HCA Trans 117.

For policies made since 2020/2021, many insurers have now included the Biosecurity Act exclusion to their disease clauses.

56

Have any courts in the country you are reporting on determined that a pandemic or virus exclusion is void as against public policy in the context of Covid-19? Please give a short description of the legal basis and relevant jurisprudence.

No

57

Have any courts in the country you are reporting on otherwise determined that a pandemic or virus exclusion is unenforceable in response to Covid-19? Please give a short description of the legal basis and relevant jurisprudence.

No

There is no general principle that a pandemic or virus exclusion is unenforceable in response to Covid-19.

However, there have been some issues with certain policy wordings in the market (see the response to Question 55 above).

58

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Coid-19 in the context of exclusions.

N/A

Regulatory oversight

Yes/ No/ N/A

Additional comments, if any.

59

Have insurance regulators in the country you are reporting on issued directives concerning coverage for claims arising out of Covid-19? Please describe the regulations that have been implemented.

Yes

In October 2020, the Australian Securities and Investments Commission (ASIC) wrote to general insurers, Lloyd’s coverholders and brokers to provide guidance on handling business interruption claims arising out of Covid-19. Guidance highlighted the importance of:

• providing clear and accurate advice to policyholders about coverage;
• assessing and paying claims that do not contain pandemic exclusions; and
• seeking further information from ASIC where necessary.

This was before the Australian Test Cases and was subject to their outcomes. Insurers were advised to monitor their outcomes.

In April 2021 ASIC also wrote to both life and general insurers setting expectations of them in relation to consumers.

60

Are regulators requiring or encouraging insurers to provide grace periods to insureds to make payments on premiums? If yes, please give a short description of the legal basis and relevant guidance.

No

There is no formal encouragement or mandate in relation to grace periods.

Government action

Yes/ No/ N/A

Additional comments, if any.

61

Has the government in the country you are reporting on implemented relief measures for losses sustained as a result of Covid-19?

Yes

See below.

62

If the answer to the above question is yes, are the relief measures available to both individuals and businesses?

Yes

See below.

63

Briefly describe the types of relief measures available to individuals and businesses.

The types of relief measures include:

• residential and commercial tenancy relief;
• fee waivers;
• payment schemes;
• access to hardship funds; and
• stimulus packages.