The Federal Court has today found in favour of Chubb and other insurers in a dispute with The Star Entertainment Group over business interruption cover related to the COVID-19 pandemic.

Chief Justice James Allsop ruled on the main part of The Star’s claim that “the application be dismissed with costs” after considering whether a Civil Authority Extension provided cover.

Justice Allsop said the extension related to events capable of causing physical damage, and losses referred to were “not the loss of use of the property or loss of custom or financial loss”.

“Further, ‘other catastrophe’ means an occurrence or event, not a state of affairs, apt to cause physical loss or destruction of or damage to property and is not apt to refer to, or encompass, and does not reach to include a pandemic of disease,” he said.

The judgment follows a hearing held over two days in late April before Chief Justice Allsop.

The Star sued Chubb as the lead insurer of the industrial special risks policy and other insurance partners for breach of contract after a claim for BI losses during the pandemic shutdown last year was declined.

The other respondents in the lawsuit are AIG Australia, XL Insurance, Zurich Australian Insurance, Allianz Australia, Swiss Re International, Assicurazioni Generali, Liberty Mutual, HDI Global, Allied World Assurance and PICC Property and Casualty.

Insurers argued the pandemic was not a conflagration or other catastrophe, for the purposes of the policy and governmental actions had caused no physical loss or damage to insured property.

They also argued that the policy’s disease extension related to a notifiable disease at the premises and resulting restrictions, but didn’t include quarantinable disease listed under the Biosecurity Act 2015.

Insurers said it wasn’t logical for the disease extension to exclude cover, yet for the policy to provide full cover, up to $4 billion, for steps to retard the spread of a quarantinable disease under the civil authority extension.

The Star had argued that the COVID-19 pandemic is a catastrophe and the governmental orders were the conduct of lawfully constituted authorities to retard it, and that to limit the scope to a physical event such as a fire was to misread the clause.

Issues related to a separate spoilage claim remain to be resolved, with Chief Justice Allsop noting that he had not “received the degree of assistance that I otherwise obtained on the main claim,” and inviting the parties to put forward further submissions.

“The spoilage claim is, in the scheme of things not a large one, but it may be of general importance,” Chief Justice Allsop said.