The fallout from the UK’s High Court business interruption (BI) ruling has been felt across the country – and now Australian insurers are wondering what this could mean for them.
The Financial Conduct Authority’s (UK regulator financial conduct) ruling has seen a largely favourable outcome for UK businesses that took out BI policies and experienced losses due to the pandemic. If a similar outcome is reached in Australia and local companies start challenging their BI policies, it could cost the insurance sector as much as $1 billion.
The Current Outlook For Australian Businesses
The Australian Financial Complaints Authority (AFCA) and the Insurance Council of Australia (ICA) recently launched a test case, which was focused on Hollard Insurance and has been used to assess different exclusions. The case is seen as urgent in nature and; thus, was pushed forwards to be held by the NSW Supreme Court on 2 October.
The pandemic has significantly impacted those in Australia and beyond. With this in mind, the CEO of Insurance Council of Australia, Andrew Hall, has said he’s glad the test case hearing is progressing as quickly as possible. Recognising the importance of this judgement, involved parties are working to bring a ruling sooner rather than later, giving customers, insurers and regulators greater clarity around pandemic-related claims.
Alex Haslam, principal of the law firm Gilchrist Connell, believes the UK ruling will have very little impact on the outcome reached on Australian shores. The Australian test case is far from that conducted overseas. While it’s concerned with a specific form of infectious disease exclusion, which is included in property insurance policies, the British test case considered the wording in a broader range of policies
However, not all Australian brokers are concerned about the flow-on impact of the UK’s business interruption ruling. Karen Hardy, principal broker at ACME Insurance Brokers, believes that clients understand general exclusions relating to infectious diseases aren’t specific to a certain disease and, rather, are intended to be all-encompassing blanket exclusions. She hasn’t had any clients pursue claims and doesn’t expect this to change anytime soon.
Business interruption insurance has been largely debated since the beginning of the pandemic. In the months and years ahead, it would be realistic to expect adjustments to BI and other insurance policy wordings in many Australian insurance firms.
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