Updated: 11 August 2022

The second of two test cases involving business interruption insurance and the COVID-19 pandemic is now subject to further High Court consideration, as the court decides whether to grant two policyholders and an insurer special leave for an appeal.

The second test case sought judicial guidance on the application of common policy wordings in business interruption insurance policies. The case was heard initially by the Federal Court, with a subsequent appeal heard by the Full Court of the Federal Court.

Applications for special leave to appeal to the High Court were filed by two policyholders in March 2022, and an application was also filed by an insurer in relation to the issue of whether JobKeeper payments should be taken into account when calculating any insurance claim amount.

The High Court has now asked to hear oral arguments on the applications for special leave to appeal. It has indicated that the oral hearing will not be listed before October 2022 at the earliest.

AFCA is not a party to the test case and is among those who await the final result of this legal action. Legal clarity is important for insurers, their customers and those who have filed complaints with AFCA.

In the meantime, any small business with a business interruption policy that is dissatisfied with an insurer’s decision can lodge a complaint with their insurer. If they do not agree with the outcome of that internal process they can then lodge a complaint with AFCA, at no cost. AFCA can make decisions on complaints up to $1.085 million in value. For more information about the complaints AFCA can consider and how we resolve them, see AFCA’s website.

Small businesses should gather relevant financial records to establish the extent of their business loss. Having them readily to hand will help insurers address claims or internal complaints about claim outcomes and assist AFCA in handling any complaint that may arise.

As always, AFCA encourages financial firms to seek to resolve disputes through their internal dispute resolution process.

The second business interruption insurance test case follows an initial test case that considered whether references to a quarantinable disease under the Quarantine Act 1908 should be construed as referring to a listed human disease under the Biosecurity Act 2015, which replaced the 1908 Act. In November 2020, the NSW Court of Appeal ruled that Quarantine Act references in policies did not automatically exclude the claims in the test case. The High Court declined leave to appeal the first test case. 

AFCA is updating the relevant complainants and insurers who have complaints with us about business interruption insurance.

AFCA and test cases

Under the AFCA Rules, a member financial firm must seek AFCA’s consent to bring a test case about a matter that would otherwise be handled by AFCA as a complaint.

AFCA cannot initiate its own test case and, once it provides approval to the member firm, it is not involved in the filing or running of a test case or any appeals. AFCA does not provide any financial, legal or other support.

One of the factors considered before agreeing to allow a member firm to treat a complaint as a test case is whether there are important issues of law to be decided.

In addition, the financial firm must meet AFCA requirements such as agreeing to pay the complainants’ legal fees incurred in the test case.


Test Case 1

You can read the NSW Court of Appeal judgment in the first test case here.  

Test Case 2

A full copy of the Federal Court judgment, delivered by Justice Jagot on 8 October 2021, and summary is available here:

A full copy of the Full Court judgment, delivered on 21 February 2022, and a summary is available here:

Full Court of the Federal Court Judgment Summary: Second test case

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