On 5 August 2021, the Federal Court of Australia handed down its decision in Star Entertainment Group Limited v Chubb Insurance Pty Ltd  FCA 907. The decision provides further clarity for businesses seeking to make COVID-19 lockdown related business interruption claims through their insurer.
The Star Entertainment Group (the Star) and its subsidiaries held an insurance policy with Chubb Insurance Australia (Chubb) and various other Australian and international insurers. The Star made a claim with Chubb for business interruption losses as a result of the COVID-19 related government restrictions across Australia. Chubb denied the Star’s claim on the basis that the policy did not cover for the losses claimed. In response, the Star sued Chubb and the other insurers for breach of contract.
The Court considered that the relevant policy provided indemnity for physical loss, destruction or damage to the property, as well as for the losses resulting from business interruption due to the physical loss, destruction or damage to the property from insured perils. The Civil Authority Extension to the policy extended coverage to loss resulting from government activity in connection with insured peril.
The Star argued that this policy extension extended indemnity to loss of use or custom or financial loss resulting from the government restrictions related to the pandemic.
The Court rejected the Star’s argument, holding that the pandemic is not an insured peril and that this policy is not catastrophe insurance. The policy must be construed as providing cover for financial losses which result from the physical, loss or destruction caused by an insured peril. The Court considered that there was no physical damage to the property, and the policy did not extend to loss of use of the property where there is no physical damage.
Chief Justice Allsop held that “the policy, on its proper construction, does not respond to the claims as made”.
Implications of this decision
This decision provides clarity for both insurers and businesses when it comes to how certain policies respond to business interruption flowing from government restrictions in the current COVID-19 pandemic.
The Star is currently considering its appeal options, and any application for an appeal must be lodged by 2 September 2021.