COVID-19; More than a Hiccup for Insurers

The NSW Court of Appeal in HDI Global Specialty SE v Wonkana No 3 [2020] NSWCA 296 has ruled that insurers cannot rely on exclusion clauses referring to the Quarantine Act (as opposed to the Biosecurity Act) to avoid coverage for losses cause by COVID-19.


COVID-19 and the associated lockdowns have caused significant interruption to business operations and profits.  As a result, coverage has been sought from insurers under various business interruption policies, some of which have been refused or denied on the basis of exclusions arising from losses caused by notifiable, quarantinable or infectious diseases.   The relevant exclusions related to quarantinable diseases under the Quarantine Act 1908 (Cth) and subsequent amendments. 

Somewhat unfortunately for the insurers involved; the Quarantine Act was repealed in 2016 and replaced by the Biosecurity Act 2015 (Cth).  Further, although COVID-19 was determined to be a listed human disease under the Biosecurity Act, COVID-19 was not declared to be a quarantinable disease under the Quarantine Act prior to its repeal.  The relevant policy wording in the proceeding was not updated to reflect this change.    

Two test cases were filed with the Supreme Court of NSW (and referred to the Court of Appeal) in order to determine whether the insurers could rely on the exclusions clauses to deny business interruption claims.

Court’s Findings – An Orthodox Approach

All five judges, relying on oft cited authorities, interpreted the exclusion clauses in accordance with the express terms of the exclusion; that is, that the words “and subsequent amendments” given their ordinary meaning, did not include the Biosecurity Act 2015 which was a new Act, not a subsequent amendment to the Quarantine Act. 

What does this mean for business interruption claims?

As at 18 November 2020, the Insurance Council of Australia has stated that it was reviewing the judgment to consider any special leave applications to the High Court of Australia.[1]  As such, this may not be the end of the matter.  Notwithstanding, and subject to the precise policy terms and conditions in question, any reliance on similarly worded exclusion clauses relying on the Quarantine Act (as subsequently amended) as grounds to exclude COVID-19 business interruption claims, would likely be construed in accordance with the Court of Appeal’s judgment and may not apply as a basis to exclude claims. 

A cautionary tale for policy drafting?

For insurers, the case provides a reminder that updates to policy wording need to consider the status of any legislation referred to in the policy to ensure that the policy accurately covers reflects the risks the insurer is willing to cover.

A further update will be provided on the filing of any special leave application with the High Court of Australia.