Request for ISR Endorsement on Biosecurity Act, 2015

Hi Allan,

Thanks for all the information regarding the issue of Quarantine Act, 1908 vs Biosecurity Act 2015.

As you stated, some insurers had updated their wordings and others had not.

This seems though only to be true of Business Pack wordings, as I am yet to find an ISR wording where this has been updated or endorsed.

Are you aware of any such endorsement and could you provide a copy?

I fear the outcome of this particular issue will be decided in the courts as there is just too much at stake for businesses not to look at class actions and articles, like the recent one from [a lawyer – name withheld][link] will no doubt, be driving and promoting this mentality.

Regards

Craig [surname and email provided]

Hi Craig,

I agree with you that the question of whether the words ‘as amended’ are sufficient to allow an insurer to rely on an act that was abolished several years ago is, in all likelihood, going to need a superior court to decide.

My personal view is that it is cruel to give struggling business owners false hope at this time, and that while there is an argument that the new legislation is more than an amendment (a minor change), it is not a lay down misere[1]. A lot is at stake here for both clients, and the industry and anyone who goes to court should understand you can never be certain of the result. The courts themselves can have different opinions, as we have just seen in the High Court decision involving Cardinal Pell[ [2].

My advice has been to read the policy involved, as so many have differences and, if after reading the coverage afforded, you believe there is a valid claim, lodge the claim as you would any other.

One note of caution. If the policy requires the outbreak to have occurred at the premises and there has been no outbreak at the Insured’s premises, then a claim for business interruption losses will fail, irregardless of any mention of the Quarantine Act or any other act as the trigger for the cover, i.e. the outbreak at the premises has not been met.

Now to your question about a clause for the Industrial Special Risks policy. LMI have been working away, for over three years now, in developing a new version of the policy that we call the Mark IV Consolidated. The wording is designed to bring the 1987 version into the 21st Century, and brings in all the core endorsements that have been tacked on to the Mark IV Advisory and Modified versions for years, and which made the policy virtually unreadable for many insureds.

Part of this review has been to update the clause to which you refer, and I reproduce the clause that we had settled on. However, since the outbreak of COVID-19, we have seen different insurers take different approaches from using a sledge hammer to crack a walnut, to adopting either this wording or one like it.

1.   Infectious or Contagious Diseases; Vermin or, Pests; or Defective Sanitary Arrangements; Food or Drink Poisoning; Murder or, Suicide

Loss as insured by Section 2 of the Policy resulting from interruption of or interference with the Business consequent upon:

• any legal authority closing or evacuating all or part of the Premises as a result of:

• the outbreak of an infectious or contagious human disease occurring within a twenty (20) kilometre radius of the Insured’s Premises, provided that there is no cover for highly pathogenic Avian Influenza or any disease declared to be a notifiable disease under the Biosecurity Act 2015, its amendments or any re-enactment of the Act, irrespective of whether discovered at the location of the Insured’s Premises, or out-breaking elsewhere;

• vermin or other animal pests at the Premises; or

• hygiene problems associated with drains or other sanitary arrangements at the Premises;

• poisoning directly caused by the consumption of food or drink provided on the Premises; or

• murder or suicide occurring at or near the Premises;

shall be deemed to be loss arising from Damage to property used by the Insured at the Insured Premises.

Under an ISR policy, we have seen that Sub-Limits for this coverage are retained and if an Insured requires more then this is purchased on an offer and acceptance basis.

[1] For the non card playing readers, a lay down misere, is a bid in the card game of 500, where the player is so sure of losing every trick that they undertake to do so with their cards placed face-up on the table. Consequently, ‘lay down misere’ is Australian gambling slang for a predicted easy victory.

[2] I offer no comment on this highly controversial case other than to point out that the High Court of Australia handed down a unanimous decision overturning the findings of the lower courts that had heard the same case. I strongly suspect that if Insurers lose in the lower courts, they will appeal the decision which means this question is likely to be a long drawn out affair. Of course if the lower courts find in favour of insurers, then an insured(s) have the same right of appeal but the cost compared to the benefit to them is much higher.