The High Court has heard the application for special leave to appeal the decision of HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296. In a win for policyholders, the High Court has refused insurers’ application for special leave to appeal. In effect this means that the Court of Appeal’s decision, that the exclusion clauses in business interruption insurance policies do not apply to business interruption caused by COVID-19, remains undisturbed.

The appellant submitted to the Court that special leave ought to be granted to appeal the Court of Appeal’s decision on the basis that insurers did not know that the Quarantine Act had been repealed and replaced in 2016 by the Biosecurity Act, and that “subsequent amendments” of the Quarantine Act ought to be interpreted as including the repeal and replacement of the Act. Insurers submitted that, although the Biosecurity Act introduced a new regulatory framework, the purpose and nature of the mechanisms of the legislations are not dissimilar. They made the submission that the authorities do not support a strict dichotomy between amendment, and repeal and replacement.

The High Court challenged these submissions on the basis that the Biosecurity Act was not merely an amendment of the Quarantine Act, but that it substituted a different regime entirely. Reference was made to the second reading speech of the Biosecurity Act, in which it was described as a “new regulatory framework”. It was also considered that the insurance policies are annual, and so the intention that the exclusion clause is to be enforced throughout the life of the policy cannot be taken as being so broad that it would include any new legislative regime introduced in time.

The High Court’s judgment on the matter appears severe, with the application for special leave being dismissed after a single sentence pronounced by Keane J, being:

“The decision of the Court of Appeal of the Supreme Court of New South Wales is not attended by sufficient doubt to warrant the grant of special leave to appeal.”

The effect of the High Court’s decision is that the Court of Appeal’s decision to disallow insurers to rely upon the erroneous reference to the Quarantine Act in business interruption exclusion clauses with respect to claims made in relation to business losses suffered as a result of the COVID-19 pandemic stands, and any such policies should be subject to strenuous review and consideration as to whether they respond.

Although this decision is good news for policyholders, there is still a second test case ongoing which was commenced by insurers to determine the meaning of certain policy wordings relating to the pandemic and business interruption. This case was commenced in the Federal Court of Australia in February 2021 and is expected to be heard in August 2021, with any appeal to be dealt with in November 2021.

If you hold an insurance policy which may respond to losses suffered as a result of the COVID-19 pandemic, or your claim with respect to COVID-19 business interruption has been denied, call us today to discuss your options.