In HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296, the NSW Court of Appeal formed a conclusion regarding the eligibility for businesses to claim insurance compensation due to COVID-19.
Two businesses (Austin Tourist Park and Thrive Health and Nutrition) were insured against interruptions to their business. When COVID-19 affected their businesses, they attempted to claim from their insurance companies. They were covered for interruptions due to outbreaks of particular infectious diseases. The insurance companies (HDI Global and The Hollard Insurance Company) denied liability and refused to make any payment under the policies.
Part of the Disease Benefit clauses in the insurance policy documents stated:
“The cover … does not apply to any circumstances involving ‘Highly Pathogenic Avian Influenza in Humans’ or other diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments…”
The Quarantine Act 1908 (Cth) (the Quarantine Act) was repealed on 16 June 2016 and replaced with the Biosecurity Act 2015 (Cth) (the Biosecurity Act). The Biosecurity Act does not use the term “quarantinable diseases” as defined in the Quarantine Act. It instead defines a contagious human disease as one that “causes significant harm to human health”. When comparing both the Quarantine Act and the Biosecurity Act, there are some diseases which are identified in both Acts, whilst others are only present in one.
The insurers argued that “quarantinable diseases” as defined under the Quarantine Act should extend to “human diseases” under the Biosecurity Act. They also argued that the reference to “subsequent amendments” in the policies extend to or include reference to the Biosecurity Act and therefore, did not cover the insureds.
The Court considered what a reasonable person would consider the wording “subsequent amendments” to mean and found that the insurers were liable to pay the insureds, largely due to the ambiguous wording of the outdated policy.
The Insurance Council of Australia (ICA) sought leave to appeal the decision however the High Court of Australia dismissed the application on 25 June 2021. A second test case has commenced in the Federal Court of Australia and we will provide an update in due course.
