The outcome of a recent test case relating to business interruption insurance for COVID-19 losses has prompted a litigation funder to fund a review of affected businesses’ insurance policies. This may signal the start of increased litigation by COVID-affected businesses against insurance companies – either individually or via class actions.
In the test case, the plaintiff insurers argued that businesses that have suffered losses due to COVID-19 were not covered under their business interruption insurance (BII) policies because of clauses excluding coverage for infectious diseases quarantinable under the Quarantine Act 1908 (Cth) and subsequent amendments of that Act.
However, the NSW Court of Appeal determined that such clauses were of no effect because the Quarantine Act 1908 was repealed in 2015 and replaced with the Biosecurity Act 2015 (Cth).
Following this decision, the insurers are considering whether to seek special leave to appeal to the High Court of Australia. No doubt relevant to their deliberation will be the UK Supreme Court’s affirmation that businesses can claim COVID-19 losses under BII policies.
The litigation funder’s plan to fund a review of BII policies is relevant to businesses that hold a BII policy, have suffered financial losses due to COVID-19 shutdowns and fall into one of the following categories:
- their BII claim for such losses was rejected by their insurer;
- their BII claim was accepted by their insurer, but they received an unreasonable payout;
- they have not made a BII claim, but held a BII policy before and during the period they sustained such losses; or
- they have not made a BII claim because their insurer or insurance broker advised that BII claims arising from COVID-19 were not covered under their BII policy.
If you believe your business meets the above criteria, then you can submit a copy of your BII policy to the litigation funder, Investor Claim Partner (ICP) to assess whether you have a potential claim. While this initial assessment appears to be free, ICP has indicated that if it determines you do have a potential claim against your insurer, then there will be costs associated with negotiating with your insurer.
ICP has estimated that this initial assessment stage will take two to three months.
We will be keeping a close eye on the progress of the test case because it will ultimately set a precedent for BII claims for COVID-19 losses. If the NSW Court of Appeal decision stands, there may be millions of dollars in insurance payouts for those businesses who were impacted by COVID-19 restrictions and had business interruption coverage in their insurance policies.
In turn, landlords who have granted concessions to tenants/lessees during the COVID period may have an interest in the outcome of these insurance claims and may require legal advice on any repercussions for their tenancy arrangements.
As ICP is a litigation funder, we suspect that if it backs further court proceedings by BII policyholders, then that will be on a ‘no-win, no-fee’ basis. However, a class action would involve:
- the one approach for a large group of claimants even though each claimant may have different needs; and
- the claimants sharing any settlement or judgment sum less legal costs and after ICP has taken its cut.
Our Litigation + Dispute Resolution team offer a local, independent and bespoke option that can be tailored to your individual needs rather than a one-size-fits-all, cookie-cutter approach. CGLaw acted in the first class action in the Queensland Supreme Court and so has signficant experience in how class actions run and how litigation funders operate.
If you need any assistance claiming under your BII policy, then our experienced Litigation + Dispute Resolution team can help.
If you’re a landlord who is interested in advice concerning repercussions for arrangements with your tenants then our experienced Commercial + Property team can help.