As the hearing for a case filed by the Insurance Council of Australia (ICA) has begun, billions of dollars are at stake if the court decides to include the COVID-19 pandemic to the application of the interruption insurance policy.
The case filed by the ICA escalated from the Supreme Court of New South Wales to the Court of Appeal, seeking clarity on the issue of whether the infectious disease is included in the business interruption insurance.
ICA consulted the Australian Financial Complaints Authority (AFCA) for the case, citing small business claims as part of the resolution. The representative body comprises 95 percent of the total premium income members by the private sector in Australia.
“The case is an important step towards providing greater clarity to customers, insurers, and regulators, in the treatment of pandemic-related claims,” said ICA CEO Andrew Hall.
The insurance sector could lose billions of dollars as businesses start to challenge the inclusion of the business interruption insurance policies. Just last week, the UK High Court concluded that business interruption insurance must pay out losses caused by the COVID-19 crisis.
The UK’s decision will also weigh on the Australian Court’s conclusion and could shatter the insurance sector as a whole. Meanwhile, the consequences can bring businesses into a position where the pandemic has never happened.
Meanwhile, AFCA clarified that it’s not a regulating body but an independent external dispute resolution body with no involvement in the running of a test case. This means the ICA, the Court of Appeals, and private insurance companies are involved in the case.
“The FCA could shape the scope and nature of any such action and was a party to the proceedings. But under the AFCA rules, other than in the case of superannuation disputes, a financial firm must request AFCA’s consent to have the complaint treated as a test case,” AFCA said.
The court hearing started on Oct. 2, with no definite date of the final Court decision.