The Federal Court of Australia has ruled that the majority of the nine business interruption insurance policies brought forth in the test case do not cover COVID-19 related financial losses. Australian insurers faced an estimated $10 billion ($7.4 billion) in business interruption claims from around 250,000 policies. This decision will have a serious impact on Australian small businesses.
The court found that the majority of the business interruption policies put before it for scrutiny would not be paid out by insurers.
The test case examined under what terms a business could claim for the downturn in trade during the pandemic, including if a government lockdown order was sufficient or whether a business needed an actual case of the virus in the business' proximity to claim.
The Court's decision was very narrow and basically means that claims under similar policies will be required to show a direct connection between COVID outbreaks on or near the premises and the government restrictions that caused loss of business.
Editor's Note: This ruling also stated that the size of insurance payouts for businesses could be reduced if they had also taken government subsidies.