COVID-19: BUSINESS INSURANCE
HDI Global Specialty SE v Wonkana No. 3 Pty Ltd ('HDI Global Speciality'), was a highly anticipated New South Wales Supreme Court of Appeal decision as a test case for whether insurance policies covering business interruption applied in respect of COVID-19.
In HDI Global Specialty the first, second and third defendants were insured against interruption to their tourist park business under a policy issued by the first plaintiff, HDI. The fourth defendant was insured under a similar business insurance policy issued by the second plaintiff, Hollard.
Importantly, both HDI and Hollard's insurance policies specified that they cover business interferences caused by outbreaks of certain infectious diseases within 20km of the insured's premises. However, both policies were subject to an exclusion clause. The HDI exclusion clause provided as follows:
'The cover . does not apply to any circumstances involving 'Highly Pathogenic Avian Influenza in Humans' or other diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments.'
In relation to the above HDI exclusion clause, and the Hollard equivalent, the two principal issues for determination were:
- whether references to ".diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments" should be interpreted as extending to diseases under the Biosecurity Act 2015 (Cth) (the Quarantine Act 1908 (Cth) was repealed in 2016 and replaced with the Biosecurity Act 2015 (Cth)); and
- if it was determined that the exclusion clause would apply to the Biosecurity Act 2015 (Cth), whether the clause should be construed as only applying to diseases defined under the Biosecurity Act 2015 (Cth) at the time the defendants entered the policy.
HDI and Hollard both submitted that the words "subsequent amendments" in their clauses should cover the Biosecurity Act 2015 (Cth) alleging it was in effect an 'amendment' to the Quarantine Act 1908 (Cth). Additionally, both insurers submitted that the references to the Quarantine Act 1908 (Cth) were an obvious mistake and a "simple" drafting error.
HDI GLOBAL SPECIALTY: DECISION
The New South Wales Supreme Court of Appeal rejected HDI and Hollard's arguments, declaring:
- 'On the proper construction of the "Tourist Parks & Lifestyle Villages Insurance Policy" issued by the first plaintiff to the first, second, and third defendants for the cover period 28 February 2020 to 28 February 2021, COVID-19 is not a disease declared to be a quarantinable disease under the Quarantine Act 1908 (Cth) and the exclusion in the HDI Disease Benefit is not enlivened.
- On the proper construction of the "Business Insurance Policy" issued by the second plaintiff to the fourth defendant for the cover period 11 May 2019 to 11 May 2020, COVID-19 is not a disease declared to be a quarantinable disease under the Quarantine Act 1908 (Cth) and the exclusion in the Hollard Disease Cover is not enlivened.'
IMPLICATIONS FOR BUSINESSES AND INSURERS
As highlighted by our previous case note on COVID-19, the courts have thus far shown reluctance in upholding arguments relying on the pandemic to excuse parties' from their obligations under commercial contracts. In contrast, HDI Global Speciality is a landmark decision for businesses impacted by COVID-19 and paves the way for a significant insurance claims being brought by businesses that suffered significant losses due to COVID-19.
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