Under the AFCA Rules, a financial firm must request AFCA’s consent to have a complaint treated as a test case.
AFCA cannot initiate its own test case. One of the factors considered before agreeing to allow a financial firm to treat a complaint as a test case is whether there are important issues of law to be decided.
The financial firm must meet the AFCA requirements, in particular by agreeing to pay the complainants’ legal fees incurred in the test case.
AFCA does not provide any financial or legal support or other resources to the running of a test case.
Once approval is provided, AFCA does not have any direct involvement in the running of the test case or any appeals.
There are now two test cases underway in relevant courts.
Test Case 1 – Quarantine Act
A test case considering the application of a common insurance policy exclusion relating to the repealed Quarantine Act 1908 was heard by the NSW Court of Appeals on 2 October 2020.
The main purpose of the test case was to seek a decision from the court on whether, in policies issued to small businesses containing business interruption cover, references to a quarantinable disease under the Quarantine Act 1908 should be construed as a reference to a listed human disease under the Biosecurity Act 2015.
On 18 November 2020, the NSW Supreme Court of Appeals ruled that Quarantine Act references in policies did not exclude the two claims in the test case. You can read the full judgment here.
The Board of the Insurance Council of Australia applied for special leave from the High Court of Australia to appeal the NSW Court of Appeal decision. AFCA awaits progress on this matter.
AFCA continues to work with regulators, industry and small businesses to resolve financial disputes fairly.
AFCA thanks those involved, notably the insurers and small businesses that took part in the test case.
Test Case 2 – Other exclusions
In line with the AFCA Rules, AFCA received a request for a second test case from a number of insurers in relation to providing guidance on the covering provisions found in many Business Interruption policies.
AFCA agreed that, under its Rules, a second test case could be submitted to a relevant court to consider these issues. On 24 February 2021, insurers lodged this test case in the Federal Court.
The first test case considered whether reference in a policy to a disease declared a quarantinable disease under the Quarantine Act 1908 (now repealed) could the taken as reference to a human infectious disease under the Biosecurity Act 2015. The second test case will provide guidance on so called trigger clauses, including those that relate to the impact of government announcements on small business, closure and the proximity of an outbreak to a small business.
Having provided approval for a test case, AFCA does not have any direct involvement in the running of the test case or any appeals. AFCA does not provide any financial or legal support or other resources to the running of the test case.
Complaints with AFCA
AFCA is in direct communication with the relevant complainants and insurers who have complaints with us about business interruption insurance. AFCA will continue to consider business interruption complaints about claims which are unrelated to the test cases.
More information about how we are required to make decisions is available here.
Any questions about the details of the test cases or any appeals are best directed to the named parties to the case.