In brief - Considerations for insurers and insureds in responding to all notifications, claims and policy issues that emerge as the rapid response to coronavirus continues
The number of cases of COVID-19 worldwide recently surpassed 750,000 and is not predicted to tail off for some time.
Australia is not alone and increasingly restrictive social distancing measures are being regularly introduced, including limits on the total number of people allowed at public gatherings and a "1 person per 4 square metre rule" for indoor gatherings (including in all shops and businesses that are not subject to mandatory closures).
Policies around self-isolation, suspension of non-essential services and social distancing are having profound impacts on businesses across Australia. Last week saw a line of people longer than 1 km form outside of a suburban branch of the government agency responsible for unemployment benefits until it was dispersed by the police.
As governments and markets continue to respond with uncertainty and volatility to this pandemic, many insurers and insureds are considering what coverage might be available and what issues they are likely to face.
Business interruption insurance
Many insureds are looking to their business interruption policies to manage their risk and losses arising out of COVID-19 but so far policy response has been limited.
Most policies require closure or evacuation by order of a public authority (rather than voluntary closures taken by businesses as precautionary measures). Cover is unlikely to apply to businesses which voluntarily close due to restrictions on public gatherings or lack of trade as there has been no "order" requiring closure or evacuation.
So far only a modest number of businesses have been ordered to close. Additionally, some policies will only extend cover where outbreaks of infectious diseases occur at the business premises or within a particular radius of the premises and others may exclude disease as a peril.
Following the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, most insurers (and reinsurers) added exclusions to policies for loss arising out of national epidemics. This was done by reference to notifiable diseases under the Quarantine Act 1908 (Cth), which was later repealed and replaced by the Biosecurity Act 2015 (Cth). Consequently, it is likely that most policies will not extend cover to loss associated with COVID-19, as it is a "listed human disease" under the Biosecurity Act 2015.
Some policies were not updated to refer to the Biosecurity Act 2015 and instead still refer to "quarantinable diseases under the Quarantine Act 1908 and subsequent amendments". It is unlikely that exclusions, which only refer to the Quarantine Act 1908, will operate to exclude cover for COVID-19 as the Biosecurity Act 2015 is unlikely to qualify as amending legislation.
Potential claims arising from COVID-19
We are seeing a significant increase in demand for employment and workplace relations advices as employers scramble to manage a response in Australia's tightly regulated labour market.
We expect that this will be followed by a wave of
employment-related litigation where employees (possibly as part of
a class action) bring claims against their employers for steps
taken (or not taken) during this crisis.
There has already been talk of class actions against companies said
to have negligently allowed persons to become infected with
COVID-19, most notably cruise ship operators. You can read more
about class actions risks in our article
C is for Crisis: Class Actions and COVID-19.
There are also rumblings on actions against Government institutions such as schools but thus far there is no evidence that their continued operation has caused further transmissions. Any action will need to compete against the strong competing policy considerations of maintaining public order and services, which the Courts have recognised can serve as a defence to negligence claims against Governments.
Implications for litigation and court procedures
Courts have fortuitously adopted information technology initiatives over the past few years, including embracing on-line case management procedures and a move to electronic/online Court Registries.
The emergence of COVID-19 has emphasised the importance of such initiatives and brought forward additional electronic platforms such as eTrials as a way of keeping the judicial system functioning.
Courts are encouraging trials and mediations to be conducted via video conferencing as much as possible. This may be less suited to large commercial trials where the volume of evidence and cross-examination of witnesses is proving difficult to manage. However, the mere preference for personal appearances is not enough to stand proceedings over: one jurisdiction's Court of Appeal has just refused to adjourn an appeal in a AUD2.5 billion contract dispute because the counsel wanted to press their case in person.
Early referrals to eTrials were also plagued by shortcomings with IT infrastructure, although now parties are being permitted to arrange their own IT support which has seen a (so far) small number of cases proceed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Marco Pedretti
