Sorry to burst your bubble guys, but this might be a sign that the share price could take a tumble. Article below from Australian Financial Review:
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Insurers lose COVID-19 business interruption test caseJames FernyhoughReporterNov 18, 2020 – 6.06pm
Insurers are facing thousands of pandemic-related business interruption claims after the NSW Court of Appeal rejected the industry's argument that policies do not cover COVID-19 related losses.The decision comes after insurers, including IAG, Suncorp and QBE, repeatedly expressed confidence that pandemic exclusions would stand, despite the fact many referred to an expired Act of Parliament.The Insurance Council of Australia immediately said it would examine its options to appeal the decision in the High Court of Australia.Suncorp, along with IAG and QBE, had incorrectly referred to the Quarantine Act in some of its business interruption policies. Insurers have consistently refused to pay COVID-19-related business interruption claims on the basis that the policies explicitly exclude interruptions caused by "quarantinable diseases".But many of these policies mistakenly referred to the Quarantine Act, which was repealed in 2015 and replaced with the Biosecurity Act. IAG, Suncorp and QBE were among the insurers to make the error.RELATED QUOTESIAGIAG$5.460 0.92%1 year1 dayNov 19Feb 20Nov 204.2006.3008.400Updated: Nov 18, 2020 – 9.24pm. Data is 20 mins delayed.
The insurance industry claimed this was clearly an error, and the intention of the policy was obviously to exclude a pandemic under any future legislation. They argued the phrase "and subsequent amendments" referred to any future legislation.But the judges disagreed, saying the policy only protected insurers under the Quarantine Act, and the phrase "and subsequent amendments" referred to amendments to that act.They said the Biosecurity Act "did not provide for declarations of quarantinable diseases by the Governor-General", instead referring to a “listed human disease”. They said COVID-19 was never declared a quarantinable disease, and therefore was not excluded.The decision referred to a specific case, involving insurer HDI and a business it had covered. However, similar wording in large numbers of policies means insurers – pending a potential High Court appeal – would not be able to stand behind the exclusion. The test case was brought by the Insurance Council of Australia and the Australian Financial Complaints Authority.RELATEDSuncorp reserves $125m for pandemic claimsFollowing the release of the judgment on Wednesday afternoon, an Insurance Council of Australia spokesman said: "The ICA, in consultation with its members and legal representatives, will urgently review the determination and specifically the grounds on which it could seek special leave to appeal against the decision to the High Court of Australia."John Berrill, an insurance lawyer with Berrill & Watson, said the ruling could bring out "tens of thousands" of claims. But he said it did not automatically mean claims would be successful."You've still got to prove you had a COVID-19 outbreak, you've got to prove you suffered loss, and that you suffered loss as a result of the outbreak. And that has not been dealt with here," he said.AdvertisementHe said insurers had used the exclusion as "a quick knock-out blow, and that strategy has not worked". Other areas in which insurers are likely to refuse claims include proximity of an outbreak, and access to the business.He said he had around 15 clients with business interruption claims "at various stages of rejection", about half of which were covered by this issue.Insurers have been coy about the cost of business interruption claims if the exclusions do not stand. However, on Monday Suncorp announced it was setting aside an additional $125 million to cover potential business interruption claims as a result of the recent Victoria lockdown. That brought its total provisions to $195 million.Mr Berrill said the insurance industry had overstated the cost of paying business interruption claims, and that it would not be the "end of the world" to pay for them.How the coronavirus is changing markets, business and politics.
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