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Hollard, HDI complaints revealed as BI test case basis

The Insurance Council of Australia (ICA) says it commenced business interruption test case proceedings in the NSW Supreme Court today.

An ICA statement says the proceedings will “test the application of certain infectious diseases exclusions in business interruption policies”.

The test case consists of two separate small business claims that were lodged with the Australian Financial Complaints Authority (AFCA) as part of its dispute resolution process. The claims were with Hollard and HDI Global Specialty.

ICA thanked the insurers for offering claims “to assist the whole insurance industry in reaching a better understanding of how the infectious disease exclusions in policy documents respond to the unique circumstances of the COVID-19 pandemic”. The insurers’ legal costs for the hearing will be paid by the ICA.

“The ICA notes that globally, insurers have designed and priced their policies on the basis that pandemics are not insurable due to the magnitude of potential losses, and the challenges of modelling the risk and ensuring coverage affordability,” today’s statement said.

“The parties have agreed to request the matter to be heard on an expedited basis.”

A spokesman for the NSW Supreme Court says the matter is listed as HDI Global Specialty SE v Wonkana No 3 Pty Limited trading as Austin Tourist Park. The Hollard Insurance Company is listed as the second plaintiff. There is no date set for the hearing.

ICA, which will be represented by Bret Walker SC, instructed by Clyde & Co, says it “will not pre-empt legal arguments that will be put forward, and encourages all parties and interested persons to allow the legal process to take place unencumbered by speculation or commentary”.

AFCA, which declined to release any further information or comment today, will use the test case outcomes to determine complaints related to business interruption claims and infectious disease exclusions.

“The ICA believes this test case is an important step towards providing greater clarity to insurers and small business customers in the treatment of pandemic-related claims,” ICA CEO Rob Whelan said.

“The industry wishes to have the case heard as quickly as possible, given the challenging times being experienced by the small business sector because of COVID-19, the past season of natural disasters and the recession.

“Most insurers have never contemplated coverage for pandemics in their policies, and did not price pandemic risks into premiums.

“They believe pandemic-related exclusions are appropriate, but wish to provide greater clarity through engaging a superior court process.”