The New South Wales Court of Appeal has ruled in favour of insurance policy holders who were denied cover by Suncorp, IAG and QBE after their businesses had experienced significant interruption due to COVID-19. Attwood Marshall Lawyers Commercial Litigation Lawyer, Georgia Taylor, discusses how reading the fine print in insurance policies can pay off.
A win for small business
In another stand out case for dodgy insurance, Suncorp, Insurance Australia Group (IAG) and QBE Insurance are being defeated by their own insurance policies in a win for small business.
We’ve all heard the ‘old ‘wives’ tale’ that you must “always read the fine print” however, for lawyers this has always been fact and not fiction. The stories are far from few, where an ordinary consumer has taken on a goliath and won because of a misspelt, poorly drafted contractual clause, or in the case for IAG, QBE Insurance and Suncorp, an outdated policy.
There is no question that 2020 has been a tough year for small business. Unfortunately, for the consumers who held insurance policies with Suncorp, IAG and QBE Insurance, their losses were exacerbated by finding out that their business disruption claims were denied.
A recent survey by CGU Insurance found that 1 in 4 small businesses would not survive if they had to close their doors for three months and further, more than a quarter of small business would need to close their doors for good because of a natural disaster. This survey highlighted the importance of business interruption insurance which is why it is commonly included and should be always recommended when setting up your business. Unfortunately, 2020 has highlighted the need more than ever before for this specific coverage.
Business interruption insurance is self-explanatory, if your business is interrupted it often guarantees the continuity of income to help you stay solvent. Common areas of this insurance include, paying key staff, paying ongoing expenses such as rent, suppliers, or loan repayments and the purchase of new equipment if the claimable event allows for it. Of course, in a global pandemic no insurance could be more valuable, and this is where the fine print steps in.
A case of outdated insurance policies
For those insured with Suncorp, IAG and QBE Insurance, the denial of their insurance claim was based on an outdated exclusion that says that the insurer will not cover claims arising from a ‘quarantinable disease’ under the Quarantine Act 1908 “and subsequent amendments”. Fortunately for consumers, the Quarantine Act 1908 is now repealed, which means that it is no longer in effect. It was however replaced by the Biosecurity Act 2015. An astute insurer would have made a slight amendment to its policy to include the new Act. Instead, Suncorp, IAG and QBE Insurance relied on the existing wording “and subsequent amendments” to deny all business interruption claims and argued to the Court that the wording should be “construed” to reference a listed human disease under the Biosecurity Act 2015.
The full bench (five judges) presiding over the New South Wales Court of Appeal unanimously decided in favour of the policy holders and ruled against the insurers by reading the clause literally and ruled that “COVID-19 is not a disease declared to be a quarantinable under the Quarantine Act 1908 (Cth)” and therefore the exclusion did not apply.
It is now estimated that Suncorp, IAG and QBE Insurance will need to pay over $500 million for business interruption to its policy holders.
This test case lost by HDI Global Specialty will set an interpretation precedent for insurance policies alike highlighting again, that you should always read the fine print.
How can Attwood Marshall Lawyers help?
We want to help you resolve your disputes and take away the stress in your life, no matter who you are coming up against. If your business has been impacted by COVID-19 and you are battling your insurance provider, who should be assisting you through this difficult time, you have a legal right to take your complaint further. For those who have suffered a large loss due to a financial institution, court action may be your only avenue to seek compensation for your loss. In some cases, we may be able to represent you in an informal mediation process with insurance companies. Our experienced Commercial Litigation team can help determine your right to compensation and in many cases represent you on a “no-win-no-fee” basis*.