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A Glimmer of Hope for Aussie Business Owners Seeking Insurance Pay-outs for COVID-19 Business Interruption

If you're a business owners whose business has been financially impacted by the pandemic, you might be curious if you have the right to claim Business Interruption Insurance.

Before COVID-19 hit Australian shores in early 2020, many business owners held some form of insurance protection to cover their business for losses in the event of interruptions to trade. With revenue at an all-time-low for many businesses as a result of the pandemic, some business owners sought reassurance from the belief that they would be covered through their business insurance policies. 

But it quickly became clear that this wasn’t how the insurers saw things, with insurers subsequently denying small business claims for pay-outs for COVID losses. The Insurance Council of Australia (ICA) stated that insurance policies were never designed to cover any pandemic-related losses and they took this claim to court to gain clarification, in what is now known as the Business Interruption Test Case.

What is the Business Interruption Test Case? 

Discrepancies in policy wordings referencing the Quarantine Act of 1908 and the Biosecurity Act of 2015 created a point of contention between policyholders and insurers, and it became unclear if policies covered pandemic-related losses or not. 

In 2020, the ICA took the Business Interruption Test Case to High Court to seek clarity on the relationship between Business Interruption Insurance claims and the unprecedented impact of the pandemic, and to prove that insurance policies do not cover pandemics of any kind. 

What Was the Verdict of the Business Interruption Case? 

After hearing the test case, the NSW Court of Appeal ruled in favour of the policyholders and found that insurers are unable to rely on the poorly worded reference to the Quarantine Act of 1908 in order to deny claims for pandemic-related losses. A special request to appeal the ruling was denied by the High Court on 25 June 2021. In response to the outcome of the first test case, the ICA have commenced proceedings for a second test case in the Federal Court of Australia set to take place in August of this year. 

Andrew Hall, Chief Executive of the ICA states that, “While we are disappointed, the decision on the first test case provides us with certainty and allows the industry to focus on the issues to be resolved through the second test case underway in the Federal Court of Australia.” 

Second Business Interruption Test Case

The second test case is predicted to provide further clarity on whether Business Interruption Insurance policies include pandemic coverage by reviewing: 

  • The meaning of policy definitions in relation to disease (including the definition of an outbreak) 
  • Relevant causation principles 
  • The scope of trends and adjustments to be applied 
  • Any other elements that can result in business interruption 

What Are the Next Steps for Business Owners? 

As we wait with baited breath for the results of the second test case, business owners are advised that the results of the first ruling won’t change anything immediately. But it is a step in the right direction.

If you’re a business owner who has been directly affected by this ruling, we encourage you to contact your insurance broker before lodging a claim to ensure accurate reporting and the collection of relevant documentation. Alternatively, if you have already lodged a Business Interruption Insurance claim, it’s important to note that insurers will be responding to policyholders who have made a claim on a case-by-case basis. 

Our BlueRock General Insurance team will continue to provide further communications on the case in due course as it continues to progress. In the meantime, for any questions or concerns regarding business interruption as a result of the COVID-19 pandemic, please contact Adam Gibbins, Director of BlueRock General Insurance, at 

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