Some of Australia’s largest insurers have said their provisions for potential business interruption claims relating to COVID-19 remain “unchanged” following a test case ruling by the federal court.
The court recently decided to uphold the arguments advanced by insurers in eight out of the nine matters related to the business interruption test case in the country.
The ruling found that the insuring clauses were not triggered in a majority of cases, meaning the policies do not respond to COVID-19 business interruption claims in the first instance.
The ruling also found that Government subsidies such as JobKeeper would be taken into account in assessing losses.
However, given the complex nature of the matter and the need to provide clarity as quickly as possible, the Federal Court anticipated and has planned for this decision to be appealed, with time set aside for the second week of November 2021.
Australian insurer Suncorp said the outcome was a “positive judgement” for insurers but said its BI claims provision of $211 million remains unchanged pending the appeal process.
The group will complete a full review of the provision as part of its normal process to prepare the interim full-year 2022 results.
IAG likewise said it will review the federal court’s judgment to determine whether to appeal any aspect of the ruling.
It will also consider the potential impact on its business interruption provision announced in November 2020 and said it will provide any required update “at the appropriate time.”
Australia’s ruling on the COVID BI test case contrasts with the legal verdict in the UK, where earlier this year the Supreme Court upheld a decision to side with policyholders on a majority of key issues.