LCA Marrickville Pty Limited v Swiss Re International SE
[2022] FCAFC 17
•21 February 2022
FEDERAL COURT OF AUSTRALIA
LCA Marrickville Pty Limited v Swiss Re International SE [2022] FCAFC 17
Appeal from: Swiss Re International Se v LCA Marrickville Pty Limited (Second COVID‑19 insurance test cases) [2021] FCA 1206 File numbers: NSD 1076 of 2021
NSD 1079 of 2021
NSD 1080 of 2021
NSD 1081 of 2021
NSD 1082 of 2021Judgment of: MOSHINSKY, DERRINGTON AND COLVIN JJ Date of judgment: 21 February 2022 Catchwords: INSURANCE – construction of policies – principles of construction – requirement to read policy “as a whole” – requirement to read policy provisions in context – giving effect to specific or important clauses which might otherwise be rendered redundant by a broad reading of other clauses – whether incongruence or incoherence as opposed to mere overlap
INSURANCE – construction of policies – principles of construction – requirement to read policy from the position of an objective third party taking into account the circumstances of the contracting parties – whether different to the position of the reasonable policyholder
INSURANCE – business interruption insurance – COVID‑19 – cause of loss – causes of loss from government imposed restrictions – whether restrictions imposed as a result of risk of disease, outbreak or threat of disease from overseas
INSURANCE – business interruption insurance – COVID‑19 – hybrid clauses – composite insured perils with consecutive sequential elements – causal nexus between elements – proximate cause not necessarily required – ordinary construction of connecting words
INSURANCE – business interruption insurance – COVID‑19 – test cases – concurrent causes of loss – application of the “underlying fortuity principle” – whether general effects of COVID‑19 arose from the same underlying fortuity as insured perils – whether concurrent cause of loss a matter which the parties would naturally expect to occur concurrently with the insured peril
INSURANCE – business interruption insurance – scope of indemnity – “trends clauses” – whether insured required to bring into account amounts received from third parties – government assistance payments provided without reference to loss incurred
INSURANCE – business interruption insurance – hybrid clauses – authority acting in response to outbreak of disease – insured obliged to establish authority acted in response to outbreak but not the actual outbreak
INSURANCE – business interruption insurance – construction of particular insuring clauses – disease clause – hybrid clause – prevention of access clause
INSURANCE – interest on claims – s 57 of the Insurance Contracts Act 1984 (Cth) – from when is it unreasonable for insurer to withhold payment of an amount – significance as to bona fide dispute as to reasonableness – whether present appeals are exceptional cases permitting insurers to withhold payment without obligation to pay interest
CONTRACTS – construction – the contra proferentem rule – rule of last resort – application of rule to policies of insurance – application of ejusdem generis and nocitur a sociis rule
CONTRACTS – meaning of words – “outbreak” – “occurrence” – “conflagration” – “catastrophe” – “premises” – “closure” – “evacuation” – “hindrance” – “physical damage”
STATUTORY INTERPRETATION – s 61A Property Law Act 1958 (Vic) – application to Acts of the Commonwealth – whether Biosecurity Act 2015 (Cth) a re‑enactment with modifications of Quarantine Act 1908 (Cth) – s 61A applies to Victorian Acts only – Biosecurity Act 2015 (Cth) not a re‑enactment with modifications of Quarantine Act 1908 (Cth)
STATUTORY INTERPRETATION – s 57 of the Insurance Contracts Act 1984 (Cth) – when unreasonable for insurer to withhold payment of the amount – significance as to bona fide dispute as to reasonableness
Legislation: Biosecurity Act 2015 (Cth), ss 2, 3, 42, 44, 45, 46, 51, 52, 477
Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth)
Coronavirus Economic Response Package Omnibus (Measures No 2) Act 2020 (Cth)
Corporations Act 2001 (Cth)
Insurance Contracts Act 1984 (Cth), ss 13, 14, 37, 54, 57
National Health Security Act 2007 (Cth)
Quarantine Act 1908 (Cth), ss 2, 4, 18
Trade Marks Act 1955 (Cth)
Trade Marks Act 1995 (Cth)
Acts Interpretation Act 1890 (Vic), ss 3, 4, 5, 6, 22, 27
Acts Interpretation Act 1915 (Vic), s 6
Acts Interpretation Act 1928 (Vic), s 6
Acts Interpretation Act 1958 (Vic), s 7
Interpretation Act 1987 (NSW), ss 5, 12
Interpretation of Legislation Act 1984 (Vic), ss 38, 16, 17
Interpretation of Legislation (Amendment) Act 1993 (Vic)
Property Law Act 1958 (Vic), ss 4, 61A
Public Health Act 2010 (NSW), s 7
Public Health Act 2005 (Qld), ss 68, 70, 362B
Public Health and Wellbeing Act 2008 (Vic), s 200
Cases cited: Adelaide (SA) Pools & Spa Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd (No 2) [2021] SASC 123
Arbory Group Ltd v West Craven Insurance Services (A Firm) [2007] Lloyd’s Rep IR 491
Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99
Australian Pipe & Tube Pty Ltd v QBE Insurance (Australia) Ltd (No 2) [2018] FCA 1450
Arnold v Britton [2015] AC 1619
Australian Casualty Co Ltd v Federico (1986) 160 CLR 513
Axa Reinsurance (UK) plc v Field [1996] 1 WLR 1026
Bankstown Football Club Ltd v CIC Insurance Ltd (unreported, Sup Ct, NSW, 17 December 1993)
Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334
Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266
BMW Australia Ltd v Brewster (2019) 269 CLR 574
Board of Trade v Hain Steamship Co Ltd [1929] AC 534
Byrnes v Kendall (2011) 243 CLR 253
Cat Media Pty Ltd v Allianz Australia Insurance Ltd (2006) 14 ANZ Ins Cas 61-700
CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535
CGU Insurance Ltd v Porthouse (2008) 235 CLR 103
Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402
Cherry v Steele-Park (2017) 96 NSWLR 548
Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd (2012) 87 ATR 880
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
CIC Insurance Ltd v Bankstown Football Club Ltd (1995) 8 ANZ Ins Cas 61-232
Commonwealth v Aurora Energy Pty Ltd (2006) 235 ALR 644
Cornish v Accident Insurance Co Ltd (1889) 23 QBD 453
Dalby v Bio-Refinery Ltd v Allianz Australia Insurance Ltd [2019] FCAFC 85
Day v Adam; Ex parte Day [1989] 2 Qd R 9
Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113
Director-General of Social Services v Hales (1983) 47 ALR 281
DRJ v Commissioner of Victims Rights (No 2) (2020) 103 NSWLR 692
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544
Elders Ltd v Swinbank (2000) 96 FCR 303
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640
F & D Normoyle Pty Ltd v Transfield Pty Ltd (2005) 63 NSWLR 502
Fenton v Thorley & Co Ltd [1903] AC 443
Financial Conduct Authority v Arch Insurance (UK) Ltd [2020] EWHC 2448
Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] AC 649
Fitness First Australia Pty Ltd v Fenshaw Pty Ltd (2016) 92 NSWLR 128
Fitzgerald v CBL Insurance Ltd [2014] VSC 493
Fitzgerald v CBL Insurance Ltd (No 2) [2015] VSC 176
Fox v Percy (2003) 214 CLR 118
Globe Church Incorporated v Allianz Australia Insurance Ltd (2019) 99 NSWLR 470
Greencapital Aust Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd [2019] NSWCA 53
Halford v Price (1960) 105 CLR 23
Hams v CGU Insurance Ltd (2002) 12 ANZ Ins Cas 61-542
HDI Global Speciality SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634
HIH Casualty & General Insurance v Insurance Australia Ltd (No 2) (2006) 14 ANZ Ins Cas 61-685
Hill v Villawood Sheet Metal Pty Ltd [1970] 2 NSWR 434
Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368
HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342
Hu v Kim [2019] NSWSC 448
Hume Steel Ltd v Attorney-General (Vic) (1927) 39 CLR 455
Hyper Trust Ltd t/as The Leopardstown Inn v FBD Insurance plc [2021] IEHC 78
Hyper Trust Ltd t/as The Leopardstown Inn & Ors v FBD Insurance plc (No 2) [2021] IEHC 279
Insurance Australia Ltd v HIH Casualty & General Insurance Ltd (in liq) (2007) 18 VR 528
Insurance Commission of Western Australia v Container Handles Pty Ltd (2003) 218 CLR 89
Jan de Nul (UK) Ltd v Axa Royale Belge SA [2002] 1 Lloyd’s Rep 583
JJ Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The ‘Miss Jay Jay’) [1987] 1 Lloyd’s Rep 32
Johnson v American Home Assurance Co (1998) 192 CLR 266
Karlsson v Griffith University (2020) 103 NSWLR 131
Kernaghan v Corrections Corp of Australia Staff Superannuation Pty Ltd (No 3) [2007] FCA 2018
Kuru v State of New South Wales (2008) 236 CLR 1
Lange v Queensland Building Services Authority [2012] 2 Qd R 457
Lasermax Engineering Pty Ltd v QBE Insurance (Aust) Ltd (2005) 13 ANZ Ins Cas 61-643
Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390
Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207
Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350
Liberty Mutual Insurance Co Australia Branch v Icon Co (NSW) Pty Ltd (2021) 154 ACSR 126
Losinjska Plovidba v Transco Overseas Ltd (The “Orjula”) [1995] 2 Lloyds Rep 395
Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633
McAuliffe v Secretary, Department of Social Security (1991) 23 ALD 284
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579
McCarthy v St Paul International Insurance Co Ltd (2007) 157 FCR 402
McConnell Dowell Middle East LLC v Royal & Sun Alliance Insurance Plc (No 2) [2009] VSC 49
McIntosh v Federal Commissioner of Taxation (1979) 25 ALR 557
Mobis Parts Australia Pty Ltd v XL Insurance Company SE (2018) 363 ALR 730
Mutual Community General Insurance Pty Ltd v Khatchmanian (2013) 17 ANZ Ins Cas 61-974
Midland Mainline Ltd v Eagle Star Insurance Co Ltd [2004] 2 Lloyd’s Rep 604
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
North v Marina [2003] NSWSC 64
O’Neill v FSS Trustee Corp [2015] NSWSC 1248
Orient-Express Hotels Ltd v Assicurazioni Generali SA [2010] Lloyd’s Rep IR 531
Park v Murray Irrigation Ltd [2018] NSWCA 166
Preston v AIA Australia Ltd [2013] NSWSC 282
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
R v Khazaal (2012) 246 CLR 601
R&B Directional Drilling Pty Ltd (in liq) v CGU Insurance Ltd (No 2) (2019) 369 ALR 137
Ranicar v Frigmobile Pty Ltd [1983] Tas R 113
Ransley v Chubb Insurance Company of Australia Ltd [2015] NSWSC 1350
Reseck v Federal Commissioner of Taxation (1975) 133 CLR 45
Re Sigma Finance Corp [2009] UKSC 2
Sayseng v Kellogg Superannuation Pty Ltd (2007) 213 FLR 174
Secretary, Department of Family and Community Services v Hayward (a pseudonym) (2018) 98 NSWLR 599
Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340
Siemens Ltd v Schenker International (Aust) Pty Ltd (2004) 216 CLR 418
Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328
Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907
Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16
Teele v Federal Commissioner of Taxation (1940) 63 CLR 201
Telstra Corp Ltd v Australasian Performing Right Association Ltd (1997) 191 CLR 140
The Trust Company (Nominees) Ltd v Banksia Securities Ltd (recs and mgrs apptd) (in liq) [2016] VSCA 324
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Triffitt v Australiansuper Pty Ltd (2007) 214 FLR 407
VL Credits Pty Ltd v Switzerland General Insurance Co Ltd (No 2) [1991] 2 VR 311
Walker v FAIInsurance Ltd (1991) 6 ANZ Ins Cas 61-081
Warren v Coombes (1979) 142 CLR 531
Wayne Tank and Pump Co Ltd v Employers’ Liability Assurance Corp Ltd [1974] QB 57
Western Australian Bank v Royal Insurance Co (1908) 5 CLR 533
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522
Wood v Capita Insurance Services Ltd [2017] AC 1173
Woolworths Ltd v Lister [2004] NSWCA 292
Worth v HDI Global Specialty SE (2021) 393 ALR 93
XL Insurance Co SE v BNY Trust Company of Australia Ltd (2019) 20 ANZ Ins Cas 62-211
Yanner v Eaton (1999) 201 CLR 351
Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 812 Date of hearing: 8, 9, 10, 11 and 12 November 2021 Counsel for the Appellant NSD1076/2021: Mr JP Slattery QC with Mr DF McAloon Solicitor for the Appellant NSD1076/2021: KHQ Lawyers Counsel for the Respondent NSD1076/2021: Mr I Pike SC with Mr T Boyle Solicitor for the Respondent NSD1076/2021: Dentons Australia Limited Counsel for the Appellant NSD1079/2021: Mr SG Finch SC with Mr AM Pomerenke QC, Mr DTW Wong and Ms NA Wootton Solicitor for the Appellant NSD1079/2021: Clayton Utz Counsel for the Respondent NSD1079/2021: Mr DL Williams SC with Mr RD Glover and Mr ND Riordan Solicitor for the Respondent NSD1079/2021: DLA Piper Australia Counsel for the Appellant NSD1080/2021: Mr SG Finch SC with Mr AM Pomerenke QC, Mr DTW Wong and Ms NA Wootton Solicitor for the Appellant NSD1080/2021: Clayton Utz Counsel for the Respondent NSD1080/2021: Mr I Jackman SC with Mr P Herzfeld SC and Mr J Entwisle Solicitor for the Respondent NSD1080/2021: Allens Counsel for the Appellant NSD1081/2021: Mr Finch SC with Mr AM Pomerenke QC, Mr DTW Wong and Ms NA Wootton Solicitor for the Appellant NSD1081/2021: Clayton Utz Counsel for the Respondent NSD1081/2021: Mr I Jackman SC with Mr P Herzfeld SC and Mr J Entwisle Solicitor for the Respondent NSD1081/2021: Allens Counsel for the Appellant NSD1082/2021: Mr AJH Morris QC with Mr VG Brennan and Mr B McGlade Solicitor for the Appellant NSD1082/2021: Corney & Lind Lawyers Counsel for the Respondent NSD1082/2021: Mr B Walker SC with Mr TW Marskell and Mr HR Fielder Solicitor for the Respondent NSD1082/2021: Wotton & Kearney ORDERS
NSD 1079 of 2021 BETWEEN: LCA MARRICKVILLE PTY LIMITED (ACN 601 220 080)
Appellant
AND: SWISS RE INTERNATIONAL SE
Respondent
AND BETWEEN: SWISS RE INTERNATIONAL SE
Cross-Appellant
AND: LCA MARRICKVILLE PTY LIMITED (ACN 601 220 080)
Cross-Respondent
ORDER MADE BY:
MOSHINSKY, DERRINGTON AND COLVIN JJ
DATE OF ORDER:
21 FEBRUARY 2022
THE COURT ORDERS THAT:
1.The Appeal be allowed in part.
2.The Cross-Appeal be allowed in part.
3.The primary judge’s answers to the questions posed be amended as follows:
1. Disease Clause (9.1.2.1) (page 31):
On the proper construction of the Disease Clause:
(a)Did the “Authority Response-LCA Marrickville” cause “closure … of the whole or part of the Situation”?
Answer: in respect of the order of 26 March 2020, yes. In respect of the orders of 1 and 13 June 2020, no.
(b) Was there a closure or evacuation of the whole or part of the Situation?
See 1(a) above.
In assessing:
(i)“closure”, must there be physical prevention of access to the Situation (or part of it), or is it sufficient there was a restriction of LCA Marrickville’s use of the Situation (or part of it) for its Business and if so, what restriction?
(ii)“evacuation”, must there be a physical removal of persons from the Situation (or part of it), or is it sufficient if there was a restriction of LCA Marrickville’s use of the Situation (or part of it) for its Business and if so, what restriction?
As to (i), there must be physical prevention of access to the Situation (or part of it) to those who would otherwise be able to obtain access (for example, members of the public).
As to (ii), this does not arise, but the answer would be yes.
(c) Was there an “outbreak” of COVID-19 at the Situation?
This cannot be answered on the evidence.
(i)Does a single person infected with COVID-19 entering the Situation constitute an “outbreak”?
Not necessarily. If the person is able to communicate COVID-19 to other people and is within the community (in the sense of not being in a controlled environment such as quarantine, isolation or a hospital) then, given the nature of COVID-19 and the associated probability of transmission including to persons unknown, a single person infected with COVID-19 entering the Situation who is in a non-controlled setting would constitute an “outbreak” of COVID-19.Unnecessary to answer.
(ii)With what degree of prevalence do instances of COVID-19 have to occur at the Situation (or elsewhere) in order to constitute an “outbreak” at the Situation?
See (c)(i) above.
(iii) Does the outbreak have to occur at the Situation or can it occur:
A.at the Situation and elsewhere and, if so, where?
B.elsewhere but not at the Situation and, if so, where?
This does not arise. The requirement of cl 9.1.2.1 is an order of a competent public authority as a result of an outbreak of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4) or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4). This depends not on objective facts but on the cause of the making of the order. The required cause must be an outbreak of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4) or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4).
If yes to (c), was the “Authority Response-LCA Marrickville” “a result of” that “outbreak”?
No.
(e)Was there a “discovery of [SARS-CoV-2] likely to result in the occurrence of [COVID-19] … at the Situation”?
On the current evidence, no. However, this does not arise for the reasons set out at 1B above.
(i)Does SARS-CoV-2 have to be discovered at the Situation or is it sufficient if it is discovered elsewhere and, if so, where?
No. If SARS-CoV-2 is discovered elsewhere but is likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the 5 kilometre radius that requirement of cl 9.1.2.1/9.1.2.4 will be satisfied. To satisfy the requirement of likelihood, however, evidence of a person with COVID-19 who is capable of communicating the disease to another person within the radius will be required. However, this does not arise for the reasons set out at B above.
(ii)Does SARS-CoV-2 have to be likely to result in the occurrence of COVID-19 at the Situation or is it sufficient if it is likely to result in the occurrence of COVID-19 elsewhere and, if so, where?
SARS-CoV-2 must be likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the 5 kilometre radius.
(f)Was the “Authority Response-LCA Marrickville” “a result of” a “discovery of [SARS-CoV-2] likely to result in the occurrence of [COVID-19] … at the Situation”?
No.
(g)What if any “interruption” or “interference” occurred “in consequence of” any “closure … by order of a competent public authority”?
None.
(h) What is required for there to be an “occurrence” of COVID-19?
A single case of COVID-19 is an occurrence of COVID-19.
2. Biosecurity Act exclusion (clause 9.1.2.1) (page 31)
(a)Is COVID-19 a disease “declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015”, in circumstances where it was determined to be a “listed human disease” after the Policy inception date and during the Policy Period?
Yes.
(b)If yes to (a), does section 54 of the Insurance Contracts Act 1984 (Cth) (ICA) have the effect that the insurer cannot refuse to pay LCA Marrickville's claim by reason only of the determination and can only reduce its liability to the extent that its interests were prejudiced as a result of the determination?
No.
(c){Swiss Re version; LCA Marrickville does not agree}: If yes to (b), was LCA Marrickville’s loss caused or contributed to by the determination?
This does not arise.
(d){LCA Marrickville version; Swiss Re does not agree}: If yes to (b), could the determination reasonably be regarded as being capable of causing or contributing to LCA Marrickville’s loss?
This does not arise.
(e)If yes to (c) and/or (d), to what extent is Swiss Re entitled to refuse to pay the claim?
This does not arise.
(f)If yes to (b) but no to (c) and/or (d), what prejudice, if any, to Swiss Re resulted from the determination and to what extent (if any) should Swiss Re’s liability in respect of the claim be reduced?
This does not arise.
(g)If the Biosecurity Act exclusion does apply to exclude LCA Marrickville’s loss from cover under the Disease Clause and the Expansion Clause, can such loss be considered for cover under the Catastrophe Clause and/or the Prevention of Access Clause?
No.
3. Expansion Clause (9.1.2.4) (page 31):
On the proper construction of the Expansion Clause:
(a)Issues 1(a), (b), (g), (h) and (i) and 2, above also arise in the context of the Expansion Clause.
The same answers apply as set out above expanded to the 5 kilometre radius.
(b)Was there an “outbreak” of COVID-19 within a five kilometre radius of the Situation?
This cannot be answered on the evidence.
In particular:
(i)Does a person infected with COVID-19 entering, or residing in, the area within five kilometres of the Situation constitute an “outbreak”?
Not necessarily. If the person is able to communicate COVID-19 to other people and is within the community (in the sense of not being in a controlled environment such as quarantine, isolation or a hospital) then, given the nature of COVID-19 and the associated probability of transmission including to persons unknown, a single person infected with COVID-19 entering the Situation who is in a non-controlled setting would constitute an “outbreak” of COVID-19.Unnecessary to answer.
(ii)With what degree of prevalence do instances of COVID-19 have to occur within five kilometres of the Situation (or elsewhere), or what other characteristics must such instances have, in order to constitute an “outbreak” within a five kilometre radius of the Situation?
See (b)(i) above.
(iii)Does the outbreak have to occur within a five kilometre radius of the Situation only or can the outbreak occur outside a five kilometre radius of the Situation as well and, if so, where?
This does not arise. The requirement of cl 9.1.2.1 is an order of a competent public authority as a result of an outbreak of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4) or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4). This depends not on objective facts but on the cause of the making of the order. The required cause must be an outbreak of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4) or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4).
(c)Was the “Authority Response-LCA Marrickville” “a result of” an outbreak of COVID-19 within a five kilometre radius of the Situation?
No.
In particular, must the relevant order be made in direct response to the specific outbreak within a five kilometre radius of the Situation or is it sufficient if the relevant order is made in response to, or to prevent, the spread of COVID-19 more broadly (e.g. on a regional, state or nationwide scale)?
This depends on the terms of the order.
(d)Was there a “discovery of [SARS-CoV-2] likely to result in the occurrence of [COVID-19]” within a five kilometre radius of the Situation?
On the current evidence, no. However, this does not arise for the reasons set out at 1B above.
(i)Does SARS-CoV-2 have to be discovered within a five kilometre radius of the Situation or is it sufficient if it is discovered elsewhere and, if so, where?
No. If SARS-CoV-2 is discovered elsewhere but is likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the 5 kilometre radius that requirement of cl 9.1.2.1/9.1.2.4 will be satisfied. To satisfy the requirement of likelihood, however, evidence of a person with COVID-19 who is capable of communicating the disease to another person within the radius will be required. However, this does not arise for the reasons set out at 1B above.
(ii)Does SARS-CoV-2 have to be likely to result in the occurrence of COVID-19 within a five kilometre radius of the Situation, or is it sufficient if it is likely to result in the occurrence of COVID-19 elsewhere and, if so, where?
SARS-CoV-2 must be likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the 5 kilometre radius.
(e)Was the “Authority Response-LCA Marrickville” “a result of” a “discovery of [SARS-CoV-2] likely to result in the occurrence of [COVID-19]” within a five kilometre radius of the Situation?
No.
4. Catastrophe Clause (9.1.2.5) (page 31):
On the proper construction of the Catastrophe Clause:
(a){Swiss Re version; LCA Marrickville does not agree}: Was the outbreak of COVID-19 a “conflagration or other catastrophe”?
No.
(b){LCA Marrickville version; Swiss Re does not agree}: Was COVID-19 and its impact a “conflagration or other catastrophe”?
No.
(c) When did any such “conflagration or other catastrophe” commence and end?
If COVID-19 is a catastrophe within cl 9.1.2.5 it commenced in NSW no later than 20 March 2020.Unnecessary to answer.
(d)Was the “Authority Response-LCA Marrickville” an “action of a civil authority” implemented “for the purpose of retarding” the “conflagration or other catastrophe”?
No.
(e)What “interruption” or “interference” occurred “in consequence of” any “action of a civil authority”?
None within the meaning of cl 9.1.2.5.
5. Prevention of Access Clause (9.1.2.6) (page 31):
On the proper construction of the Prevention of Access Clause:
(a) Was there a “risk to life … within five kilometres of [the] Situation”?
This does not arise. The requirement is action of a lawful authority attempting to avoid or diminish a risk to life within 5 kilometres of the Situation. There is no requirement to prove as an objective fact a risk to life within 5 kilometres of the Situation.
(i)Does the “risk to life” have to exist within five kilometres of the Situation only or can the “risk to life” exist in areas further [than] five kilometres from the Situation as well and, if so, where?
See (a) above.
(ii)Must the relevant order be made in direct response to the specific “risk to life” within five kilometres of the Situation, or is it sufficient if the relevant order is made as part of an attempt to “avoid or diminish risk to life” of a broader scope (e.g. on a regional, state or nationwide scale)?
There is no requirement in this regard other than action of a lawful authority attempting to avoid or diminish a risk to life within 5 kilometres of the Situation. It does not matter is the authority is also attempting to avoid or diminish a risk to life outside 5 kilometres of the Situation.
(b)Was the “Authority Response-LCA Marrickville” taken in an attempt to avoid or diminish the identified “risk to life”?
No, because cl 9.1.2.6 does not apply to actions of an authority relating to a disease. If this is wrong, yes.
(c) Was access to or use of the Situation prevented or hindered?
Yes. The 26 March 2020 order prevented access to and prevented the use of the Situation. The 1 and 13 June 2020 orders potentially hindered use of the Situation.
In particular, must the use of or access to the Situation for any purpose be prevented or hindered or is it sufficient for use of or access to the Situation for the purposes of LCA Marrickville’s Business, to be prevented or hindered?
It is sufficient if use of or access to the Situation for the purposes of LCA Marrickville’s Business, is prevented or hindered.
(d)What, if any, “interruption or interference” occurred “in consequence of” any “action of any lawful authority”?
None because cl 9.1.2.6 does not apply to an authority’s action in response to a disease.
(e){LCA Marrickville presses for the underlined words in this paragraph} To what extent would LCA Marrickville’s access to or use of the Situation have been prevented or hindered, regardless of the lawful authority’s action, and to what extent (if any) does this affect indemnity?
This does not arise.
6. Clause 9.1.2 (page 31):
On the proper construction of clause 9.1.2:
(a)Is Swiss Re’s obligation to indemnify an “Insured” in respect of loss resulting from the interruption of or interference with the “Business” in consequence of closure or evacuation of the whole or part of the “Situation” by order of a competent public authority as a result of:
(i) an outbreak of a notifiable human infectious or contagious disease; or
(ii)any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease,
confined to the terms of the Disease Clause and the Expansion Clause (as it applies to the circumstances of the Disease Clause)?
Clauses 9.1.2.5 and 9.1.2.6 do not apply to actions of an authority in response to a disease.
7. Causation, Adjustment and Basis of Settlement
If clause 9.1.2 of the Policy responds, on the proper construction of the adjustment clause (being the clause in the last sub-paragraph of Clause 8 on p. 29 of the Policy):
(a)Was there any interruption of or interference with LCA [Marrickville]’s Business in consequence of the relevant insured perils in the Disease Clause, the Expansion Clause, the Catastrophe Clause or the Prevention of Access Clause?
While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, it should follow that there was interruption of or interference with LCA Marrickville’s Business in consequence of the relevant insured perils in the applicable clause. The fact that LCA Marrickville may also have suffered loss generally from the existence and risk of COVID-19 in NSW would not mean that the action of the authority would not also be a proximate cause of LCA Marrickville’s on the facts.
(b)What adjustment of the Rate of Gross Profit, Standard Turnover, Standard Gross Revenue, Standard Gross Rental and Rate of Payroll is necessary to provide for the “trend” of the Business, “variations” affecting the Business and/or “other circumstances” affecting the Business.
While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, the adjustments clause does not require any adjustment to be made for the existence and risk of COVID-19 in NSW as it is an essential cause of the Damage.
(c)How, if at all, does adjustment take into account the effect that COVID-19 had on the Business (other than the effect of the “Authority Response–LCA Marrickville”).
While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, the adjustments clause does not require any adjustment to be made for the existence and risk of COVID-19 in NSW as it is an essential cause of the Damage.
(d)To what extent should account be made for grants, subsidies, abatements or other benefits received by LCA Marrickville when assessing its entitlement to be indemnified for its loss (if any) including but not limited to JobKeeper, other payments made to it by a Commonwealth or State Government and rental relief or rebates?
While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, LCA Marrickville, either under the general law or cl 10.1.3 would have to account for payments received under the JobKeeper scheme, by way of rental relief, and franchisor relief. It would not have to account for the act of grace payments received from the NSW Government.Unnecessary to answer
If clause 9.1.2 of the Policy responds, on the proper construction of the Basis of Settlement clause (clause 10):
(e) What is the date of the ‘Damage’?
While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, the date of the Damage would be the date of the first action by an authority satisfying an insuring clause, which would be 26 March 2020.
(f){LCA Marrickville does not agree that issue (f) should be included in this test case because the factual premise for this issue will be the subject of a separate loss assessment process} To the extent interruption of, or interference with, LCA Marrickville’s business was caused by different matters comprising the “Authority Response-LCA Marrickville”, to what extent is the resulting loss (if any) to be aggregated for the purposes of applying a limit, deductible and any other conditions of cover?
Insufficient submissions were made to enable this issue to be answered.
8. Interest
(a) Is interest payable by Swiss Re pursuant to section 57 of the ICA?
No.
(b) If yes to paragraph (a), from what date is any such interest payable?
This does not arise. If it did arise, interest would be payable from the date of final determination of this proceeding is Swiss Re is liable to pay under the policy.Unnecessary to answer.
4.Otherwise the Appeal and the Cross-Appeal be dismissed.
5.No order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 1080 of 2021 BETWEEN: MERIDIAN TRAVEL (VIC) PTY LTD (ACN 111 480 883)
Appellant
AND: INSURANCE AUSTRALIA LIMITED (ACN 000 016 722)
Respondent
AND BETWEEN: INSURANCE AUSTRALIA LIMITED (ACN 000 016 722)
Cross-Appellant
AND: MERIDIAN TRAVEL (VIC) PTY LTD (ACN 111 480 883)
Cross-Respondent
ORDER MADE BY:
MOSHINSKY, DERRINGTON AND COLVIN JJ
DATE OF ORDER:
21 FEBRUARY 2022
THE COURT ORDERS THAT:
1.The Appeal be allowed in part.
2.The Cross-Appeal be allowed in part.
3.The primary judge’s answers to the questions posed by the parties be amended as follows:
9. Disease extension (policy schedule, paragraph (c) of the “Murder, Suicide or Disease” clause (page 5)):
(a)Did an occurrence of an outbreak of COVID-19 occur within a 20 kilometre radius of the Situation? If so, when?
Yes. The outbreak occurred by no later than 30 March 2020. Further evidence may prove that the outbreak occurred earlier, by 1 March 2020.
10. Evacuation and Closure extension (policy schedule, paragraph (d)(1) of the “Murder, Suicide or Disease” clause (page 5)):
(a)Was Meridian’s Business closed or evacuated by order of a government, public or statutory authority by reason of the “Authority Response-Meridian”?
No
(b)If yes to (a), were those orders consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at the Situation?
This does not arise but, if it did, the answer would be no.Unnecessary to answer.
(c){CGU disputes the inclusion of issues (c)-(f)} Did the discovery have to occur at the Situation or could it have occurred elsewhere and, if so, where?
Clause 8(d)(1) requires only that the order be consequent on discovery of an organism (anywhere) likely to result in a human infectious or contagious disease at the Situation.Unnecessary to answer.
(d)If the outbreak or discovery had to occur at the Situation, did it so occur at the Situation?
There is no requirement that the outbreak occur at the Situation - see cl 8(c). There is no requirement that the organism be discovered at the Situation - see cl 8(d)(1). It is agreed that there was no outbreak of COVID-19 or discovery of the SARS-CoV-2 organism at the Situation.Unnecessary to answer.
(e)What is required for there to be an “occurrence” of an outbreak [of] COVID-19?
The “occurrence” of an outbreak of COVID-19 means any event of that kind. An “outbreak” of COVID-19 is the occurrence of a single case of COVID-19 while a person is in the community (that is, not in a controlled environment such as quarantine, isolation or a hospital) and who is capable of communicating COVID-19 to another person.Unnecessary to answer.
(f) What is required for there to be the “discovery” of SARS-CoV-2?
A “discovery” means finding or ascertaining the existence of SARS-CoV-2. It can be inferred that SARS-CoV-2 has been “discovered” at a location if a person with SARS-CoV-2 is found or ascertained to have been at that location during an infectious period.
11. Causation, adjustments and loss (page 21):
If it is found that the Disease extension and/or the Evacuation and Closure extension responds to Meridian’s claim:
(a)Was there any interruption of or interference with Meridian’s Business which was a direct result of the relevant insured perils?
There is no evidence as yet from which I would infer that the insured perils were a proximate cause of any interruption of or interference with Meridian’s business.
(b)If yes to (a), what losses claimed by Meridian resulted from that interruption of or interference with its Business?
This question cannot be answered on the current evidence.
(c){CGU disputes the inclusion of this issue (c)} Is the term “Adjustment” in the Business Interruption section of the policy applicable to the calculation of Meridian’s claim, having regard to the definitions used in the “Settlement of Claims” clause in the Business Interruption section of the policy.
No.
(d){CGU version; Meridian does not agree}: Should any adjustment be made to Meridian’s business interruption loss by reference to uninsured events relating to the COVID-19 pandemic?
Adjustments should not be made to Meridian’s business interruption loss by reference to uninsured events caused by the same underlying fortuity as the insured peril. The fortuity underlying the insured peril is not “COVID-19 generally” but the presence and risk of COVID-19 in Victoria”. Adjustments should otherwise be made to Meridian’s loss.
(e){Meridian version; CGU does not agree}: Should any adjustment be made to Meridian’s business interruption loss by reference to events (other than the insured perils) relating to the COVID-19 pandemic?
Adjustments should not be made to Meridian’s business interruption loss by reference to uninsured events caused by the same underlying fortuity as the insured peril. The fortuity underlying the insured peril is not “COVID-19 generally” but the presence and risk of COVID-19 in Victoria”. Adjustments should otherwise be made to Meridian’s loss.
(f) What loss is payable in accordance with the terms of the policy?
This question cannot be answered on the current evidence.
(i)Are JobKeeper or other government subsidies to be taken into account in the assessment of any loss and, if so, in what way?
JobKeeper - yes.JobKeeper - no.
Federal COVID-19 Consumer Travel Support Program - no.
Victorian Government Support Fund - no.
Meridian would have to account for the full amounts paid to it under these schemes as operating to reduce its loss.(ii)Should rental abatements be taken into account in assessing recoverable loss?
Yes.
(iii) On what dates did the indemnity period/s start and end?
The indemnity period starts on the occurrence of the Damage (which must mean the insured peril) and ends when the results of Meridian’s business cease to be affected as a consequence of the damage, such period not exceeding 12 months.
(iv)Further quantum issues may be raised when Meridian provides the information that has been requested by CGU.
Noted.
(g){Meridian disputes the inclusion of subparagraph (f), as those issues should not be included in this test case in circumstances where CGU has denied indemnity and because the factual premise for these issues will be the subject of a separate loss assessment process} Has Meridian:
(i)provided sufficient information for CGU to determine any amount payable under the policy; and/or
Not to my knowledge.
(ii) failed to respond to reasonable requests for information from CGU?
Not to my knowledge.
(h)If it is found that the policy responds and CGU is liable to pay an amount to Meridian, from what date is interest under section 57 of the ICA payable?
The issue whether Meridian can establish that the insured peril in 8(c) was a proximate cause of any of its loss remains unanswerable on the current state of the evidence. On the current state of the evidence, Meridian has not proved that to be the case. As a result, s 57 has not yet been engaged. If Meridian is entitled to cover, further evidence and submissions would be required in relation to interest.
4.Otherwise the Appeal and the Cross-Appeal be dismissed.
5.No order as to costs.
[Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]
ORDERS
NSD 1081 of 2021 BETWEEN: THE TAPHOUSE TOWNSVILLE PTY LTD (ACN 603 252 482)
Appellant
AND: INSURANCE AUSTRALIA LIMITED (ACN 000 016 722)
Respondent
ORDER MADE BY:
MOSHINSKY, DERRINGTON AND COLVIN JJ
DATE OF ORDER:
21 FEBRUARY 2022
THE COURT ORDERS THAT:
1.The Appeal be allowed in part.
2.The primary judge’s answers to the questions posed be amended as follows:
12. Disease clause (clause 8, page 23):
(a)Was all or part of Taphouse’s premises closed or evacuated by any legal authority by reason of the “Authority Response-Taphouse”?
No.
(b)If yes to (a), was that closure or evacuation as a result of the outbreak of COVID-19 occurring within a 20 kilometre radius of Taphouse's premises?
No.
13. Prevention of access (POA) clause (clause 7, page 23):
(a)Does the POA clause apply to an outbreak of COVID-19 in light of the separate disease clause?
No.
(b)If yes to (a), did the “Authority Response-Taphouse” involve any legal authority preventing or restricting access to Taphouse’s premises or ordering the evacuation of the public?
This does not arise. If it did, then yes, except for the 29 March 2020 order.
(c)If yes to (a) and (b), were those orders as a result of damage to, or the threat of damage to, property or persons within a 50 kilometre radius of Taphouse’s premises?
This does not arise.
(d){CGU disputes the inclusion of this paragraph} Alternatively to (c), how are the words “as a result of … damage to or threat of damage to … persons” to be construed? In particular:
(i)Does the “threat of damage” have to exist within 50 kilometres of the premises only or [can] it exist in areas further than 50 kilometres from the premises as well and, if so, where?
The threat of damage within the 50 kilometre radius must be a proximate cause of the action of the authority. It may be such a cause if the authority considers the threat exists anywhere provided it also considers it exists within the 50 kilometre radius.The threat of damage within the 50 kilometre radius does not need to be a proximate cause of the action of the authority. It only needs to be more than a remote cause. If the authority considers the threat exists in all parts of the State and the prevention or restriction of access is caused by that threat, the clause will respond because the threat within the 50 kilometre radius is “a cause”.
(ii)Must the relevant order be made in direct response to the specific “threat of damage” within 50 kilometres of the Situation, or is it sufficient if the relevant order is made as a result of “threat of damage” both within the radius and of a broader scope (e.g. on a regional, state or nationwide scale)?
See (i) above.
14. Causation, adjustments and loss (page 19)
If it is found that the Disease clause and/or the POA clause responds to Taphouse’s claim:
(a)Does the interruption of or interference with Taphouse’s business have to be “a direct result” of or “result from” or be “caused by”, the relevant insured perils, and if not, what is the relevant test?
The insured peril has to be a proximate cause of the interruption of or interference with Taphouse’s business.
(b)Was there any interruption of or interference with Taphouse’s business which satisfies the test of causation identified in the answer to (a)?
No. If, however, I am wrong about the application of cll 7 and 8 then Taphouse has proved some loss (reduced turnover evidence) which should be inferred to be result of the relevant proximate cause.
(c)If yes to (b), what losses claimed by Taphouse resulted from that interruption or interference of Taphouse’s business?
This cannot be answered on the evidence but the loss would exclude savings from the JobKeeper payments, the Commonwealth Cash Flow Boost and rental waivers or abatement from Taphouse’s landlord, but not the Queensland Government’s COVID-19 Grant.Unnecessary to answer.
(d){CGU disputes the inclusion of this issue (d)} Is the term “Adjustment” in the Business Interruption section of the policy applicable to the calculation of Meridian’s [sic, Taphouse’s] claim, having regard to the definitions used in the “Settlement of Claims” clause in the Business Interruption section of the policy.
No, but the loss must be in consequence of the damage.
(e){CGU version; Taphouse does not agree}: Should any adjustment be made to Meridian’s [sic, Taphouse’s] business interruption loss by reference to uninsured events relating to the COVID-19 pandemic?
Not if the uninsured events are a result of the same underlying cause as the insured peril, in this case being the presence and risk of COVID-19 in Queensland.
(f){Taphouse version; CGU does not agree}: Should any adjustment be made to Meridian’s [sic, Taphouse’s] business interruption loss by reference to events (other than the insured perils) relating to the COVID-19 pandemic?
See (e) above.
(g) What loss is payable in accordance with the terms of the policy?
See (c) above.
(i)Are JobKeeper or other government subsidies to be taken into account in the assessment of any loss and, if so, in what way?
See (c) above.
(ii)Should rental abatements be taken into account in assessing recoverable loss?
Yes
(iii) On what dates did the indemnity period/s start and end?
The indemnity period started on the date Taphouse suffered loss from the insured peril and ended 12 months later provided that Taphouse’s business continued to be affected as a consequence of the insured peril.
(iv)Further quantum issues may be raised when Taphouse provides the information that has been requested by CGU.
Noted.
(h){Taphouse does not agree that this issue be included in this test case in circumstances where CGU has denied indemnity and because the factual premise for these issues will be the subject of a separate loss assessment process} Has Taphouse:
(i)provided sufficient information for CGU to determine any amount payable under the policy; and / or
(ii) failed to respond to reasonable requests for information from CGU?
These questions cannot be answered.
(i) If it is found that the policy responds and CGU is liable to pay an amount to Taphouse, from what date is interest under section 57 of the ICA payable?
This does not arise, but it would not be unreasonable for Insurance Australia to withhold payment unless and until it is finally determined to be liable to make payment in this proceeding.Unnecessary to answer.
3.Otherwise the Appeal be dismissed.
4.No order as to costs.
[Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]
ORDERS
NSD 1082 of 2021 BETWEEN: MARKET FOODS PTY LIMITED (ABN 48 604 308 581)
Appellant
AND: CHUBB INSURANCE AUSTRALIA LIMITED (ABN 23 001 642 020)
Respondent
ORDER MADE BY:
MOSHINSKY, DERRINGTON AND COLVIN JJ
DATE OF ORDER:
21 FEBRUARY 2022
THE COURT ORDERS THAT:
1.The appeal is dismissed.
2.There is no order as to costs.
[Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]
ORDERS
NSD 1076 of 2021 BETWEEN: DAVID COYNE (IN HIS CAPACITY AS LIQUIDATOR OF EDUCATIONAL WORLD TRAVEL PTY LTD (ACN 006 888 179) (IN LIQUIDATION))
First Appellant
EDUCATIONAL WORLD TRAVEL PTY LTD (ACN 006 888 179) (IN LIQUIDATION)
Second AppellantAND: QBE INSURANCE (AUSTRALIA) LIMITED (ACN 003 191 035)
Respondent
AND BETWEEN: QBE INSURANCE (AUSTRALIA) LIMITED (ACN 003 191 035)
Cross-Appellant
AND: DAVID COYNE (IN HIS CAPACITY AS LIQUIDATOR OF EDUCATIONAL WORLD TRAVEL PTY LTD (ACN 006 888 179) (IN LIQUIDATION))
First Cross-Respondent
EDUCATIONAL WORLD TRAVEL PTY LTD (ACN 006 888 179) (IN LIQUIDATION)
Second Cross-Respondent
ORDER MADE BY:
MOSHINSKY, DERRINGTON AND COLVIN JJ
DATE OF ORDER:
21 FEBRUARY 2022
THE COURT ORDERS THAT:
1.The appeal be allowed in part.
2.The cross-appeal be dismissed.
3.The primary judge’s answers to the questions posed by the parties be amended as follows:
Property Law Act
1. Does section 61A of the Property Law Act 1958 (Vic) apply to the policy, such that the reference to the repealed Quarantine Act 1908 (Cth) is to be construed as a reference to the Biosecurity Act 2015 (Cth), and such that a disease determined to be a “listed human disease” under the Biosecurity Act 2015 (Cth) falls within the scope of the exclusion from cover for business interruption?
No.
Prevention of access (POA) extension (page 12)
2. Was there “closure or evacuation of all or part of the [insured’s] premises” within the meaning of the policy?
No.
3. If the answer to 2 is ‘yes’, was it due to any one or more of the directions as set out in Annexures A and B of the Statement of Agreed Facts?
No.
4. If the answer to 3 is ‘yes’, was it an order by a competent government, public or statutory authority as a result of a human infectious or contagious disease?
This does not arise, but if it did arise all of the actions on which EWT relied were orders of a competent government, public or statutory authority as a result of a human infectious or contagious disease.
5. If the answer to 3 and 4 is yes, did the “closure or evacuation of all or part of the premises”:
(a)prevent or hinder the use of the insured’s building or access thereto; or
No.
(b)“result in” a cessation or diminution of trade “due to” the temporary falling away of potential customers?
No.
6. Was there “interruption or interference with” the insured’s business within the meaning of the policy?
No.
7. If the answer to 6 is yes, was the interruption or interference “in consequence of” closure or evacuation of all or part of the premises within the meaning of the policy?
No.
Loss
8. Whether, having regard to the answers to issues 1 – 7 above, the Policy responds to EWT’s claim for indemnity.
No.
Concurrent Causes
9. If the answer to issue 8 is “yes”, whether:
(a)the appropriate counter-factual for the purposes of the “Standard Income” definition in the Policy may take into account the presence and effect of COVID-19 as relevant circumstances, so that any payment to be made reflects the results that but for the insured events, would have been obtained during the relevant period (less any expenses saved as a result of the loss or damage); or
This does not arise.
(b)to the extent EWT suffered loss that was caused concurrently by events or circumstances referable to the outbreak of COVID-19 other than as a consequence of the matters set out in 2 to 7 above, the Prevention of Access Extension in the Policy covers EWT for the loss resulting from any such concurrent causes of that loss.
This does not arise.
Interest
10. Is interest under section 57 of the Insurance Contracts Act payable? If so from what date is interest payable?
This does not arise, but it would not be unreasonable for QBE to withhold payment unless and until it is finally determined to be liable to make payment in this proceeding.Unnecessary to answer.
4.The appeal otherwise be dismissed.
5.There be no order as to costs.
[Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]
REASONS FOR JUDGMENT
MOSHINSKY J:
Introduction
I have had the considerable benefit of reading in draft the reasons for judgment of Derrington and Colvin JJ (the joint judgment). I agree with their Honours’ reasons and with the orders they propose. I wish to set out, briefly, why I have reached the same conclusions as their Honours on certain key issues in each appeal (including, where applicable, the cross-appeal). The following reasons are by way of addition, and are not intended to qualify my agreement with the reasons in the joint judgment. For the purposes of these reasons, I gratefully adopt their Honours’ outline, for each appeal, of the relevant facts, the policy wording, the decision of the primary judge, and the issues to be determined. I also adopt the abbreviations used in the joint judgment.
General issues
The principles of construction applicable to commercial documents, such as the insurance policies in issue in these appeals, are well-established, and are outlined in Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16 at [8]-[14]. That appeal was heard at the same time as the present appeals, and the reasons for judgment of the Full Court in that matter have been handed down on the same day as the reasons for judgment in the present appeals. As is well-established, the task of contractual construction is to be approached objectively, in the sense that the meaning of the words used is to be ascertained by reference to what a reasonable person would have understood the language of the contract to convey; this normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. See also: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [22] per Gleeson CJ; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] per French CJ, Hayne, Crennan and Kiefel JJ; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46], [47], [51] per French CJ, Nettle and Gordon JJ, at [109] per Kiefel and Keane JJ; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [16]-[17] per Kiefel, Bell and Gordon JJ. When undertaking this task, “preference is given to a construction supplying a congruent operation to the various components of the whole”: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at [16] per Gleeson CJ, McHugh, Gummow and Kirby JJ.
In the judgment of the primary judge at [53], her Honour noted that the parties relied on those parts of the reasoning in Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] AC 649 (FCA v Arch) that suited their purposes. The same can be said of the parties’ submissions on appeal. Insofar as the judgments of the Supreme Court of the United Kingdom deal with causation, their Lordships’ reasoning was helpfully summarised by the primary judge at [53]-[83] of her Honour’s reasons. I do not consider it necessary for the purposes of deciding any issue in the present appeals to consider the correctness or otherwise of their Lordships’ reasoning in relation to causation. It is important to note that the underlying factual circumstances in the United Kingdom at the relevant times for the purposes of FCA v Arch were very different from those in Australia at the relevant times for the purposes of these appeals (namely, during 2020 and 2021). As the primary judge noted at [56], an important part of the context of the decision in FCA v Arch was that the outbreak of COVID-19 in the United Kingdom was “so widespread”. In comparison, it could not be said that the occurrence of COVID-19 cases in Australia at the relevant times was widespread: PJ [66].
LCAM appeal
The relevant policy wording is set out in the joint judgment. While it is necessary to have regard to all of these provisions, and the policy document as a whole, it is convenient to set out the key relevant terms, which are as follows. Section 2 of the policy dealt with interruption insurance. Within that section, cl 9 provided in part:
9. Extent of Cover
9.1The Insurer will indemnify the Insured in accordance with the provisions of Clause 10 (Basis of Settlement) against loss resulting from the interruption of or interference with the Business, provided the interruption or interference:
9.1.1 is caused by Damage occurring during the Period of Insurance to: …
9.1.1.1any building or any other property or any part thereof used by the Insured at the Situation for the purposes of the Business;
…
9.1.2 is in consequence of:
9.1.2.1closure or evacuation of the whole or part of the Situation by order of a competent public authority as a result of an outbreak of a notifiable human infectious or contagious disease or bacterial infection or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease or consequent upon vermin or pests or defects in the drains and/or sanitary arrangements at the Situation but specifically excluding losses arising from or in connection with highly Pathogenic Avian Influenza in Humans or any disease(s) declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015;
…
9.1.2.3 injury, illness or disease arising from or likely to arise from or traceable to foreign or injurious matter in food or drink provided from or on the Situation;
9.1.2.4 any of the circumstances set out in Sub-Clauses 9.1.2.1 to 9.1.2.3 (inclusive) occurring within a 5 kilometer radius of the Situation;
9.1.2.5 the action of a civil authority during a conflagration or other catastrophe for the purpose of retarding same;
9.1.2.6 the action of any lawful authority attempting to avoid or diminish risk to life or Damage to property within 5 kilometres of such Situation which prevents or hinders the use of or access to the Situation whether any property of the Insured shall be the subject of Damage or not,
occurring during the Period of Insurance. Such events shall be deemed to be loss caused by Damage covered by Section 2 of this Policy. Furthermore Clauses 12 and 13 shall not apply to the cover provided by this Clause 9.1.2.
(Original emphasis).
The primary judge held that the exclusion in the latter part of cl 9.1.2.1 applied in the present case (as COVID-19 had been listed as a human disease pursuant to s 42(1) of the Biosecurity Act 2015 (Cth)) and that, accordingly, cl 9.1.2.1 (as expanded by cl 9.1.2.4) did not apply in this case: PJ [215], [233], [327]. There is no appeal from that conclusion.
The key determinative issue in the appeal is whether the primary judge was correct to conclude that, as a matter of construction, cll 9.1.2.5 and 9.1.2.6 did not apply in the present case. The primary judge’s construction was essentially based on construing these clauses in the context of the policy as a whole. That context included the whole of cl 9.1.2. The primary judge considered that cll 9.1.2.1 and 9.1.2.4 exclusively provided for loss as a result of an outbreak of a notifiable human infectious or contagious disease or bacterial infection or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease, where cl 9.1.2.3 was not applicable: PJ [241]-[252]. Accordingly, insofar as loss was consequent on the action of an authority resulting from disease, cll 9.1.2.5 and 9.1.2.6 were incapable of being engaged: PJ [253]. The primary judge also held that, in any event, cl 9.1.2.5 had nothing to do with diseases. This was because, read in context, the word “catastrophe” here referred to something like a conflagration, which is a physical event requiring physical action to be retarded; in that respect, a pandemic is not like a conflagration: PJ [332]-[336]. For these additional reasons, the primary judge held that cl 9.1.2.5 did not apply: PJ [337].
In my view, the primary judge’s construction of these clauses is the correct construction, for the reasons given by her Honour. Among other things, as the primary judge reasoned at [244], “construing cll 9.1.2.5 and 9.1.2.6 as applying to diseases generally would expunge the careful distinction drawn by cl 9.1.2.1 between notifiable diseases and listed human diseases. That distinction would be meaningless. So too would the requirement for an order of an authority resulting from a notifiable disease. The inconsistency between the provisions would be profound.” As her Honour said, the result would not be a reasonable and commercial operation of this part of the policy: PJ [244]. Further, the presence of the Biosecurity Act exclusion in cl 9.1.2.1 indicates that cll 9.1.2.5 and 9.1.2.6 were not intended by the parties to apply to diseases, as does the sub-limit on liability for diseases (as the primary judge reasoned at [247]).
For these reasons, reading cll 9.1.2.5 and/or 9.1.2.6 as applicable to loss as a result of an outbreak of a notifiable human infectious or contagious disease or bacterial infection or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease, where cl 9.1.2.3 was not applicable, would result in incoherence and incongruity in the terms of the policy. The primary judge’s construction, with which I respectfully agree, places emphasis on the text of the policy and reading cll 9.1.2.5 and 9.1.2.6 in the context of the policy as a whole. That approach is consistent with, and supported by, the principles of construction referred to above.
It follows that LCAM was not entitled to indemnity under the policy in respect of its claims, and the primary judge was correct to so hold: PJ [419]. This is determinative of the substance of the appeal.
Meridian appeal
The relevant policy wording is set out in the joint judgment. Again, while it is necessary to have regard to all of these provisions, and the policy document as a whole, it is nevertheless convenient for present purposes to set out the key relevant terms. Section 2 of the policy dealt with business interruption. This included a section headed “Additional benefits”. As amended by the Schedule to the policy, this provided in part:
Additional benefits
This section is extended to include the following additional benefits. …
For additional benefits 1 to 9 inclusive We will pay You (depending on the part of this section which is applicable to You) for: …
e) ‘Item 9 Gross revenue’,
resulting from interruption of or interference with Your Business as a result of Damage occurring during the Period of Insurance to, or as a direct result of:
…
8. Murder, Suicide or Disease
The occurrence of any of the circumstances set out in this Additional Benefit shall be deemed to be Damage to Property used by You in the Situation.
…
(c)The outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation.
(d)Closure or evacuation of Your Business by order of a government, public or statutory authority consequent upon:
(1)the discovery of an organism likely to result in a human infectious or contagious disease at the Situation; or …
Cover under Additional Benefits 8(c) and 8(d)(1) does not apply in respect of Highly Pathogenic Avian Influenza in Humans or any other diseases declared to be quarantinable diseases under the Quarantine Act 1908 and subsequent amendments.
As noted in the joint judgment, there is some inconsistency in the numbering in the policy. It will be convenient to refer to the above clause as “cl 8”.
As will be noted, the exclusion at the end of cl 8 referred to the Quarantine Act 1908 (Cth). However, before the policy commenced, the Quarantine Act had been repealed and the Biosecurity Act, which covers some of the same subject matter as the Quarantine Act, had been enacted. Prima facie, on the basis of the decision of the NSW Court of Appeal in HDI Global Speciality SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634 (Wonkana), this meant that the exclusion did not operate. However, in circumstances where Meridian was based in Victoria, the insurer in this matter sought to rely on s 61A of the Property Law Act 1958 (Vic) (set out in the joint judgment) in the following way. The insurer argued that the policy of insurance was governed by the law of Victoria and that s 61A operated such that the reference in the exclusion to “quarantinable diseases under the Quarantine Act 1908 and subsequent amendments” was to be construed as a reference to “listed human diseases under the Biosecurity Act”. The primary judge rejected the insurer’s contention that s 61A operated in that way. For the reasons set out in the joint judgment, the primary judge was correct to so hold. It follows that the exclusion at the end of cl 8 did not operate. It can therefore be put to one side.
Clause 8(c)
Before the primary judge, the insurer accepted that there was an outbreak of COVID-19 within 20 kilometres of Meridian’s premises (which were in Heidelberg, Victoria) by no later than 30 March 2020: PJ [449]. The primary judge stated that, based on the evidence, she was unable to find that there was an outbreak (in the sense discussed earlier in her reasons) of COVID-19 within 20 kilometres of Meridian’s premises before 30 March 2020: PJ [450]-[451]. The primary judge also stated that she would not infer that the outbreak ceased by February 2021, as the insurer proposed: PJ [452]. For these reasons, the primary judge held that cl 8(c) applied on the facts of the case from 30 March 2020 to at least the beginning of February 2021: PJ [453]. Apart from a challenge by the insurer to the primary judge’s construction of the word “outbreak”, there is no challenge to these conclusions of the primary judge. For the reasons given in the joint judgment, the primary judge’s construction of “outbreak” was correct.
A key issue in this appeal is whether the primary judge’s treatment of causation and adjustments in relation to cl 8(c) was correct. The primary judge dealt with this issue at [479]-[497]. The primary judge held that, on the current state of the evidence, she was unable to infer that the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation was a proximate cause or any other kind of cause of Meridian’s loss: PJ [481]; see also [496]-[497]. The primary judge stated that, given the lack of focus on this issue in the hearing, she would be prepared to hear the parties further about it if appropriate: PJ [481]. Her Honour discussed a number of issues that arose. One of the issues that concerned her Honour (see [485]) was: assuming Meridian can prove that the insured peril in cl 8(c) was a proximate cause of some loss, could it be said, consistently with the logic and reasoning about causation and trends in FCA v Arch, that various actions of the Commonwealth Government (in particular, the Overseas Travel Ban and the ban on cruise ships) were caused by the same underlying fortuity as the insured peril? Her Honour held that the underlying fortuity in the case of the Commonwealth action was not the same as the underlying fortuity of the presence of COVID-19 in the State and the associated risk of spread of COVID-19 throughout the State (including the area within the radius or at the insured Situation): PJ [488].
In my view, proceeding on the basis that the principles relating to “underlying fortuity” were correctly stated by the UK Supreme Court in FCA v Arch (which principles were not challenged by Meridian), the primary judge’s conclusion on this issue was correct, for the reasons her Honour gave at [485]-[490]. As the primary judge stated at [487], the Commonwealth actions focused not on the presence of COVID-19 in the State and the associated risk of the spread of COVID-19 throughout the State (including the area within the radius or at the insured Situation); they were focused on the presence of COVID-19 overseas and the risk that an overseas traveller coming to Australia may bring COVID-19 into any part of Australia. The underlying fortuities involved different subject-matter (as the primary judge said at [488]).
Clause 8(d)(1)
The primary judge held that cl 8(d)(1) did not apply in the circumstances of this case. Although there is no appeal by Meridian in relation to this conclusion, I note the following matters for completeness. The primary judge held that the Overseas Travel Ban did not close any part of Meridian’s travel business: PJ [463]. The primary judge stated that the fact that international bookings had comprised approximately 90% of Meridian’s revenue and the Overseas Travel Ban had the effect of curtailing or destroying Meridian’s business did not mean that the business, or part of it, was closed by an order as required by cl 8(d)(1): PJ [463]; see also [464]-[465]. Similarly, the primary judge held, the relevant lockdown directions did not close the whole or part of Meridian’s business: PJ [466]-[467]. The primary judge also held that the causal element of cl 8(d)(1) (“consequent upon”) was not present: PJ [469]-[477]. Accordingly, the primary judge held that cl 8(d)(1) was not satisfied: PJ [478]. As noted above, Meridian does not challenge this conclusion.
Taphouse appeal
The relevant policy wording is set out in the joint judgment. As noted for the other appeals, while it is necessary to have regard to all of these provisions, and the policy document as a whole, it is nevertheless convenient for present purposes to set out the key relevant terms. Section 2 of the policy dealt with business interruption. This included a part dealing with extensions of cover. That part included:
Extensions of cover
This section is extended to include the following additional benefits. …
We will pay you (depending on the part of this section which is applicable to you) for:
a) item 1 Gross profit, …
resulting from interruption of or interference with your business as a result of insured damage occurring during the period of insurance to, or as a direct result of:
…
7. Prevention of access by public authority
We will pay for loss that results from an interruption of your business that is caused by any legal authority preventing or restricting access to your premises or ordering the evacuation of the public as a result of damage to or threat of damage to property or persons within a 50-kilometre radius of your premises.
8. Murder, suicide & infectious disease
We will pay for loss that results from an interruption of your business that is caused by:
a)any legal authority closing or evacuating all or part of the premises as a result of:
i.the outbreak of an infectious or contagious human disease occurring within a 20-kilometre radius of your premises, however, there is no cover for highly pathogenic Avian Influenza or any disease declared to be a quarantinable disease under the Quarantine Act 1908 (as amended) irrespective of whether discovered at the location of your premises, or out-breaking elsewhere
…
Clause 7
A key issue in this appeal is whether the primary judge was correct to hold that cl 7 did not apply to diseases, which, instead, were regulated exclusively by cl 8: PJ [561]. The primary judge’s view was based on construing cl 7 in the context of the policy as a whole, including, in particular cl 8. Her Honour considered that the operation of the policy would otherwise involve “profound incongruence and incoherence”. Her Honour inferred that the parties could not have intended that cl 7 would apply to an authority preventing or restricting access to the premises under cl 7 where the threat of damage to persons was from a disease. This was because, if that were so, the various conditions or requirements within cl 7 would be circumvented or would not apply: PJ [561].
In my view, the primary judge’s construction of these clauses is the correct construction, for the reasons given by her Honour at [561]-[564]. In particular, if cl 7 were construed as applying to an authority preventing or restricting access to the premises where the threat of damage to persons is from a disease: (a) the requirement in cl 8 for an authority to close or evacuate the premises “as a result of” the outbreak of the disease would be circumvented; (b) the 20 kilometre radius in cl 8 would be circumvented and the 50 kilometre radius in cl 7 would apply; (c) the limitation in cl 8 to infectious or contagious human diseases would not apply; and (d) the exclusion of highly pathogenic Avian Influenza in cl 8 would not apply. In light of these matters, construing cl 7 as applying to an authority preventing or restricting access to the premises where the threat of damage to persons is from a disease would result in profound incoherence or incongruence, as the primary judge concluded. It follows that the primary judge was correct to conclude that Taphouse was not entitled to indemnity under cl 7.
Clause 8
Another key issue in this appeal is whether the primary judge was correct to hold that the causal requirement in cl 8 was not satisfied. The primary judge found that the relevant State directions were made as a result of the threat or risk of harm to human health across the whole of Queensland by reason of COVID-19, but that it could not be inferred that the directions were a result of an outbreak of an infectious or contagious human disease occurring within a 20 kilometre radius of the premises: PJ [588]. The primary judge noted, at [589], the distinction between, on the one hand, an authority preventing or restricting access to the premises as a result of a threat or risk of harm to each and every person in the State (which was relevant to one of the alternative issues that her Honour had considered in relation to cl 7), and, on the other hand, an authority closing or evacuating the premises as a result of an outbreak of an infectious or contagious human disease occurring within a 20 kilometre radius of the premises. Her Honour found that the relevant State directions “had nothing to do with a perceived outbreak of COVID-19 within a 20 kilometre radius of [Taphouse’s] premises”: PJ [590]; see also [591]. Further, the primary judge found, the relevant directions were not made because of an outbreak of COVID-19 across the whole of Queensland (including within the 20 kilometre radius of the premises): PJ [591]. Accordingly, the primary judge held, the causal requirement of the clause was not satisfied.
Before directly addressing this issue, I note that, for the reasons given in the joint judgment, ground 2(a) of Taphouse’s notice of appeal is made out. This concerns a factual statement made by her Honour at [601] that there was no evidence that there was a single case of a person within the 20 kilometre radius who was in the community with COVID-19 at a time when the person was capable of communicating the disease to others. For the reasons given in the joint judgment, that statement was in error – the evidence from the forms submitted to NOCS was sufficient to justify the conclusion that, prior to 23 March 2020 (the date of the relevant direction), there were persons infected with COVID-19 within the community within an area of 20 kilometres of Taphouse’s premises and capable of communicating it to others. In other words, contrary to the primary judge’s statement, there was an “outbreak” or “outbreaks” of COVID-19 in the 20 kilometre radius of Taphouse’s premises prior to 23 March 2020.
In my view, notwithstanding the above point, the primary judge was correct to conclude that the causal requirement of cl 8 was not satisfied. The text of cl 8 requires that the authority close or evacuate all or part of the premises “as a result of” the outbreak of an infectious or contagious human disease occurring within a 20 kilometre radius of the premises. There is no indication here that the directions were made as a result of the outbreak or outbreaks of COVID‑19 within the 20 kilometre radius of Taphouse’s premises (even if the Chief Health Officer was aware of that outbreak or those outbreaks). Nor were the directions made as a result of an outbreak or outbreaks of COVID-19 in each and every part of Queensland, such that it could be said (by analogy with the situation in the United Kingdom considered in FCA v Arch) that the directions were a result of the outbreak or outbreaks within the radius of 20 kilometres of Taphouse’s premises.
It follows that the primary judge was correct to conclude that Taphouse was not entitled to indemnity under cl 8.
Market Foods appeal
The relevant policy wording is set out in the joint judgment. Again, while it is necessary to have regard to all of these provisions, and the policy document as a whole, it is again convenient to set out the key relevant terms. Section 2 of the policy dealt with business interruption. Within that section, Extensions B and C provided in part:
Extensions B: Following damage at locations not occupied by you
Cover under Section 2 is extended to include loss resulting from Business Interruption to property: (a) of a type insured by this Policy; and (b) at the locations described in points 1. to 8. directly below;
…
4. Public Authority
any legal authority preventing or restricting access to an Insured Location or ordering the evacuation of the public due to damage or a threat of damage to property or persons within 50 kilometres of any Insured Location.
…
Extension C: non damage
1. Infectious Disease, Murder and Closure Extension
Cover is extended for loss resulting from interruption of or interference with the Insured Location in direct consequence of the intervention of a public body authorised to restrict or deny access to the Insured Location directly arising from an occurrence or outbreak at the premises of any of the following:
a) Notifiable Disease, or
b) the discovery of an organism likely to cause Notifiable Disease;
…
leading to restriction or denial of the use of the Insured Location on the order or advice of the local health authority or other competent authority.
Cover under this Extension does not include the costs incurred in cleaning, repair, replacement, and recall or checking of property.
The preamble to Extension B used the expression “Business Interruption”, which was defined as:
Business Interruption
means the interruption of or interference with Your Business in consequence of Insured Damage that occurs during the Policy Period.
That definition used the expression “Insured Damage”, which was defined as follows:
Insured Damage
means physical loss, destruction or damage occurring during the Policy Period caused by an event insured under the Property Damage, Theft, Money, Glass or General Property Sections.
No error was shown in the learned primary judge’s conclusion that the closure of EWT’s premises was not caused by Victorian Workplace Closure directions, and it follows that this ground of the appeal should be rejected.
Did the Victorian Workplace Closure directions prevent or hinder the use of the premises? – Appeal, Ground 4
This ground could only have relevance if the appellant succeeded on Grounds 1, 2 and 3 of its appeal. It is that the primary judge erred in concluding (at [1125]) that the Victorian Workplace Closure directions “did not in fact prevent or hinder the use of the premises because the insured had already closed the premises”. This submission relied upon the requirement in the tailpiece of cl 3 that the insured perils are of a nature:
which shall prevent or hinder the use of your building or access thereto, or results in a cessation or diminution of trade due to temporary falling away of potential customers.
EWT submitted that the learned primary judge erred by identifying that it was the order that must have the effect of preventing or hindering the use of the building or access thereto or result in a cessation or diminution of trade. Rather, so the submission went, it is the “closure or evacuation of all or part of the premises” which is to have this effect.
With respect, this appears to involve a somewhat narrow reading of the primary judge’s reasons. It is apparent from the reasoning which had preceded the impugned part of her Honour’s reasons that her references to “the order” was shorthand for the closure of the premises effected by the order in question. Even if that were not so, the conclusions reached are not vitiated. The point made by her Honour was that the Overseas Travel Ban had the consequence of destroying EWT’s business and the closure of the premises with the consequence that the Victorian Workplace Closure directions could have no relevant effect. They could not cause the closure of the business which was already closed, they could not have the effect of preventing or hindering the use of the premises which were not being used, they could not result in a cessation or diminution of trade due to temporary falling away of potential customers because the trade had been destroyed, and they could not interrupt or interfere with the business which was effectively defunct to the extent that it operated from the premises: cf. FCA v Arch at 740 [243] – [244].
It is, with respect, very difficult to identify the point of EWT’s submission. In the circumstances, neither the Victorian Workplace Closure directions nor any notional closure nominally caused by it could have any of the consequences prescribed by the tailpiece of the prevention of access clause.
EWT further submitted that, although the business closed at the end of March 2020, by reason of the Overseas Travel Ban, the ban did not compel its closure but, as the Victoria Workplace Closure direction required the premises to be closed from 6 August to 9 November 2020, a reasonable business person would understand that legal compulsion to constitute an additional hindrance on EWT’s used of its building or access thereto. In this respect, it was submitted that “hindrance” was not synonymous with “prevention” and connoted “something being rendered more difficult” and was something less than “prevent”. On that basis it was submitted that the Victorian Workplace Closure directions hindered (if not prevented) the use of EWT’s building or access thereto.
That submission should also not be accepted. Whilst it may be true that the direction rendered access to the premises unlawful and subject to a penalty if the restriction was breached, it had no actual or real impact on EWT’s intended use of the premises. It had closed them and did not require access to or use of them. The matters referred to in the tailpiece of cl 3 are not mere theoretical requirements. They are matters which require satisfaction in fact. In circumstances where the insured was no longer using or intending to use its premises, no order, however stringent, can have the effect of preventing or hindering their use by the insured.
Causation of loss under cl 3 – Appeal, Ground 5
By this ground, EWT contends that the learned primary judge erred in her conclusion that the expression “in consequence of” in the chapeau of cl 3 required more than that the insured peril be “a cause” or “a contributing factor” to the relevant business interruption or interference. Her Honour held (PJ [1132]) that expression concerned the causal relationship between the interruption or interference and the insured peril and, whilst it did not contemplate indirect causation (in the sense of extending to encompass a mere cause of a cause), nor did they require the cause to be an effective, dominant, essential or proximate cause. The essence of EWT’s submission is that the primary judge sought to impose a higher degree of causation than the words “in consequence of” required.
This issue is a pure question of the proper construction of the expression “in consequence of” in the context in which it is used. It is used as the required nexus between the insured peril and the insured loss. For the reasons which have been set out previously there are logical grounds for requiring that the insured peril be “the efficient cause” of the loss, but it is undoubted that the parties may, by clear words, alter the presumption such that something less or more is required. In this matter, QBE supported the primary judge’s interpretation and did not suggest that the expression was limited to the “proximate cause” of the loss. It can be accepted that the primary judge determined the issue as it was advanced by the parties despite the fact that it would not be unusual for the words “in consequence of” as used in cl 3 to impose a requirement of “proximate cause”: FCA v Arch at 717 [162].
In these circumstances, her Honour’s conclusion as to the scope of the expression “in consequence of” can be accepted. Importantly, it is consistent with the authorities to which her Honour referred. The expression requires that there be an event which “follows as an effect or a result” of another, although it need not be the dominant cause: Reseck v Federal Commissioner of Taxation (1975) 133 CLR 45 at 51, and although requiring causation, “the term ‘consequence’ — with its emphasis on effect — places less emphasis on the proximity of cause and effect than the term ‘cause’ may do in various contexts”: Container Handlers at 107 [45]. So, in an insuring clause, although requiring that there be some causal nexus between the loss and the insured peril, that “nexus is less than a direct or proximate relationship as required by the words ‘caused by’”: XL Insurance v BNY Trust Company at 77,407 – 77,408 [62]. Whilst EWT relied on a number of other authorities in support of the broader interpretation, the meanings of the expression as used in taxation legislation: McIntosh v Federal Commissioner of Taxation (1979) 25 ALR 557: or social security legislation: McAuliffe v Secretary, Department of Social Security (1991) 23 ALD 284 at 295; Director-General of Social Services v Hales (1983) 47 ALR 281 at 300 – 301: are not especially persuasive.
With respect, the primary judge’s conclusion on this issue is plainly correct. The phrase, “in consequence of”, is used in cl 3 as the causal nexus between the insured loss and the insured perils and there are good commercial reasons for reading the clause as requiring real causality between the insured peril and the loss. It is uncommercial for the insurer to be responsible for every loss which is consequent upon the happening of an insured peril, no matter how tenuous the connection. Conversely, the insured perils in cl 3 are somewhat specific and that narrows the occasions on which the clause will respond. On that basis, it is not difficult to accept the appropriateness of the causal nexus being less than the proximate cause, and the expression “in consequence of” tends to suggest that to have been intended. These reasons further support the construction accepted by the primary judge.
Here, in order for cl 3(c) to have any effect the following must occur: (a) there is a relevant disease; (b) as a result of which an order is made by a relevant authority; (c) by which the premises are closed; and (d) the closure prevents or hinders the use of the premises or access to it or results in a cessation or diminution of trade due to temporary falling away of potential customers. It is only the loss which is “in consequence of” this composite peril which is indemnified. In general terms, so long as items (a) and (b) are satisfied, it is the loss which is a consequence (being the effect of) the closure of the premises which hinders its use or access to it or results in a diminution of trade by the fall in customers, which is recoverable under the policy.
This was addressed by the primary judge (PJ [1134] – [1138]) who, after considering the cognate discussion in FCA v Arch at 748 – 749 [281] – [286], observed that it is only the loss which results from the insured peril which is recoverable and not other losses which are the result of other causes (such as COVID-19 more generally). Her Honour noted that, although EWT used the premises as its administrative centre from which sales were effected, no sales were transacted by persons entering there. For EWT, the Overseas Travel Ban effectively terminated its business by eliminating the demand for tours, but did not do so by closing the premises from which the business was conducted. In that way, the insured peril (the causally effective elements of which were the closure of the premises having the effect of preventing or hindering the use of the premises or of diminishing trade) did not result in EWT suffering an interruption to its business. As her Honour observed, had the Overseas Travel Ban not eliminated the business, EWT could have continued to operate irrespective of the closure of the premises. It was permitted to use the premises for limited purposes and its staff were able to work from home. This reinforced her Honour’s conclusion that, even if the Overseas Travel Ban had caused the closure of the premises, the requirement for interruption or interference with the business “in consequence” of the closure would not be satisfied.
The necessary conclusion is that, even on the broadest interpretation of “in consequence of”, it could not be said that EWT’s losses from interference or interruption to its business were “the effect of” or followed from the insured peril. This ground of appeal also fails.
Can the business interruption be “in consequence of” any one or more of the elements of the insured peril? – Appeal, Ground 7
It is convenient to deal with Ground 7 of the appeal prior to Ground 6. Each of them covered similar issues, although Ground 7 was broader than Ground 6 and it is fair to say possibly encompasses it entirely.
The substance of this ground is that, in applying the relevant causal nexus, the primary judge erred by limiting the requirement of business interruption or interference to the consequence of only one element of the insured peril, relevantly, the “closure” of the premises. So the submission went, the correct causal inquiry, once all the elements of the insured peril were satisfied, was whether the business interruption or interference was suffered in consequence of any one of those three elements. On this approach, the losses which flowed from the outbreak of the disease would be covered even if they were not consequent upon the closure of the business and were caused otherwise than as a result of the closure. This was said to accord with a reasonable businessperson’s interpretation of cl 3 and would give it a commercial and businesslike construction.
The ramification of this submission is that, if cl 3 responded to EWT’s claim, the indemnity for loss was not limited to that which was “in consequence” of the closure of the premises which prevented access to the premises or a diminution in trade (paraphrasing these latter requirements), but extended to the entire effects of the infectious disease which resulted in the government order. It was further submitted that if the Court focused only on the effects of the closure of the premises, the scope of the cover would depend upon issues of timing and the extent of the impact of the underlying infectious disease in a manner in which the reasonable business person would not have understood.
In support of this, Mr Slattery QC submitted that as the composite peril requires all three components to be in existence at once, this tells the reasonable reader that all three elements would be affecting the business at once. That, of course, is not correct. The infectious disease which results in an order may not occur near the insured’s premises and yet the relevant authority may impose a relevant closure order. This was a common experience in a number of Australian States at the relevant times where, as a consequence of the risk of the spread of COVID-19, orders were made restricting access to business premises despite the absence of the existence of the virus in the locality of the premises or it otherwise having any impact on the business.
Next, it was submitted that, as the occurrence of the infectious disease was logically first in time and was sufficiently serious to warrant government orders, by the time of the happening of the insured peril it would have had far reaching detrimental consequences to the insured’s business. From this it was submitted that the reasonable insured would appreciate that damage will be sustained to their business beyond that caused by any closure order and would expect that loss to be within the policy’s indemnity. For the reasons identified above, this submission is founded upon a false premise. It is quite possible for orders to cause the closure of a business before the relevant infectious disease has otherwise caused loss. One might expect that once an outbreak of an infectious disease is identified, authorities will usually respond rapidly. It may be that in the extreme example of an international pandemic a perception may change, but it would be unusual to interpret a policy by regard only to its response to exceptional events. Moreover, the clause does not in fact require an occurrence or outbreak of a disease, but merely that the order is made as a result of a disease. It is not correct to assume that in every case a relevant order will be preceded by any significant impact on the insured’s business by the underlying disease.
It was then submitted that as, the existence of the disease is necessarily the first in time, it can be expected that the business will have sustained damage prior to any closure and that the reasonable reader would conclude that, as diseases are not generally excluded, their effects will be covered. Again, the underlying assumption is misplaced.
The fundamental difficulty with these attempts at identifying textual support for the proffered construction is that they completely ignore the causal nexus between the disease, the order, and the closure as well as their required sequence. In effect, it is assumed that the reasonable reader will not regard as relevant the sequence or the causal requirements so evidently present in the clause. That is, they will ignore the words “in consequence of closure or evacuation of … the premises” as well as the tailpiece of cl 3. It is only by this process that the construction advanced by EWT can be sustained.
An attempt was made to support the construction by reference to an example consequent upon the presence of vermin at the insured premises in respect of which cover is provided in cl 3 (d). It was submitted that it would be incongruous for cover not to be provided to a person who voluntarily closes their business as a result of the presence of vermin before an order of an authority is made, but cover would be provided if the insured waited until the order’s making. However, as the primary judge observed (PJ [1117]), if the proximate cause of the closure of the business is the existence of vermin, the subsequent making of the order cannot have any relevant causal effect, let alone be the proximate cause of the closure and subsequent loss. The position would be different if the insured, having eradicated the vermin, then sought to reopen only to be prevented by the continuance of the order. At that point the closure order as a result of vermin would be the cause of the business interruption.
Mr Slattery QC maintained there was support for this construction in Hyper Trust (No 1). That matter involved four insureds, all of whom operated public houses and held policies of insurance with FBD Insurance. The insureds claimed they were entitled to be indemnified under those policies for loss caused by the interruption to their businesses consequent upon lockdowns which were imposed as a result of the COVID-19 pandemic in Ireland. One relevant extension provided:
The Company will also indemnify the Insured in respect of (A), (B) or (C) above [the relevant losses] as a result of the business being affected by:
(1)Imposed closure of the premises by order of the Local or Government Authority following:
(a)Murder or suicide on the premises
(b)Food or drink poisoning on the premises
(c)Defective sanitary arrangements, vermin or pests on the premises
(d)Outbreaks of contagious or infectious diseases on the premises or within 25 miles of same.
McDonald J observed (at [127]) that parties disagreed as to the nature of the insured peril in extension (1)(d). The insurer had submitted that it was simply the closure of the premises. His Honour considered this to be problematic because it would substantially reduce the extent of any recovery under the policy as the insureds would have to show that the losses suffered by them stemmed from the closure as opposed to the outbreaks of COVID-19 giving rise to the closure. The insureds submitted that the relevant peril was a composite one involving all of the constituent elements of extension (1)(d) being “that the business has been affected by (a) an imposed closure (b) by order of a local or government authority, following (c) an outbreak of infectious disease on the premises or within a 25 mile radius.” Of this his Honour said (at [127]):
If the plaintiffs are right in their contention that extension (1) (d) covers a composite peril, this may enable them, in making their case, to rely on each of these elements of the composite peril as causes of their losses at least for as long as the composite peril continued in existence.
His Honour held that the construction favoured by the insured should prevail, stating (at [133]):
… In the case of extension (1), it is clear, in my view, that what is covered is not an effect on the business by an imposed closure but an effect arising from an imposed closure by an order made by either a local authority or a government authority “following” one or more of the specific circumstances described in sub-paras. (a) to (d). While counsel for FBD has sought to characterise the circumstances described in sub-paras. (a) to (d) as restrictions or limitations on the cover available, it seems to me that the more natural and obvious way to describe the matters set out at sub-paras. (a) to (d) is that they constitute words of definition of the relevant risk or peril which is covered. Rather than breaking up the clause in the manner suggested by FBD, it seems to me that the clause needs to be read as a whole. In my view, that is how the clause would be read by a reasonable person standing in the shoes of the parties to these proceedings. … When read in that way, it seems to me that one does not pause at the reference to imposed closure and regard everything which follows as a limitation or restriction on those words. One would read the clause as a whole in order to understand the precise perils which are covered by the extension. FBD is essentially telling the policy holder what it will indemnify under this extension. In order to understand what FBD will indemnify, it is necessary to read the entire extension.
His Honour later said (at [177]):
… In my view, FBD is wrong to suggest that cover is only available in respect of losses proximately caused by imposed closure. That fails to describe the full terms of the peril which is described in extension (1) (d). As explained above, that peril is a composite one which involves both an imposed closure and an outbreak of infectious disease which is a cause (in the manner outlined above) of the imposed closure. All of the elements of the composite peril must be borne in mind.
EWT also relied on his Honour’s later observations at [215]:
In the course of the hearing, it was accepted by all parties to these proceedings that, in identifying the appropriate counterfactual it is necessary to strip out the insured peril. … In this context, having regard to the terms of extension (1) (d), it is clear that the peril envisages outbreaks of an infectious or contagious disease which are sufficiently serious to warrant intervention by the authorities by means of an order to close public houses within a 25 mile radius. For as long as the closure endures, the outbreaks are an inherent element of the peril and, for that reason, it seems to me that, for the duration of the period of closure, both the closure and the effects of outbreaks of the disease must be stripped out of the counterfactual. Whether that involves a stripping out of all of the effects of the disease or only the effects of the outbreaks within a 25 mile radius is a separate question.
It is apparent from his Honour’s reasons (at [127]) that he was concerned that the insurer’s contested construction of the policy would restrict recovery to losses which arose as a result of the closure of the premises and that the insured would be denied recovery if the effect of the infectious disease in the community would have caused the loss in any event. In essence, his Honour encountered the same difficulty as had the Supreme Court in FCA v Arch in relation to business interruption cover based on localised cause not responding to loss caused by events of much greater magnitude. Whereas the Supreme Court had resolved this by the adoption of the “underlying fortuity” principle, McDonald J steered a different course. (The decision in FCA v Arch was delivered only three weeks prior to the publication of his Honour’s reasons in Hyper Trust (No 1)). His Honour held that, if the peril was a composite one, it had the advantage that the insured was entitled to recover for losses caused by any of the elements regardless of whether the loss flowed from the closure of the business.
This particular point of contention arises in relation to two issues. First, the insured may only recover loss proximately caused by the insured peril and, secondly, in business interruption policies, the amount of any indemnity is reduced by the operation of “trends” clauses. In relation to the first, the usual rule is that if it cannot be said that the insured’s loss would not have occurred “but for” the insured peril, in the sense that the loss would have occurred for other reasons, the peril cannot be said to have caused the loss. In respect of the clauses under consideration (and in respect of those in cognate cases), the insurers have submitted that the policies do not respond because the insured would have suffered the losses caused by the closures ordered by authorities by reason of the pre-existing general impact of COVID-19 on the businesses. One method of avoiding that consequence is to identify the relevant counterfactual for the purposes of assessing causation as one in which each element of the composite insured peril is “stripped out”. If the insured peril is taken to include each and every element of the composite peril (as if an insured peril of its own), the counterfactual will be a scenario which is absent of the effects of COVID-19. On the other hand, if a narrow view is taken of the insured peril (being the closure of the premises), the counterfactual would include the effects of COVID-19 and, thereupon, may deny any substantive causative effect from the peril. In FCA v Arch the Supreme Court found that the underlying fortuity principle provided a safe passage between Scylla and Charybdis.
In trends clauses, the amount of any indemnity is often reduced by reference to those matters which would have affected the insured’s business “but for” the occurrence of the insured damage. If then, the insured peril is narrow (in Hyper Trust (No 1), the closure of the premises by the local authority’s order) those circumstances which would be taken into account to reduce the amount of indemnity would include the detrimental effects of COVID-19 generally. If, on the other hand, the insured peril was identified broadly, such as including the existence of COVID-19, its effects would not be taken into account so as to reduce the amount of the indemnity. Rather than adopt the “underlying fortuity” principle favoured by the UK Supreme Court in FCA v Arch, McDonald J adopted the unique approach of construing the composite insured peril as covering any loss caused independently by any element of the insured peril. This approach appears to have been adopted from the first instance decision in Financial Conduct Authority v Arch Insurance (UK) Ltd [2020] EWHC 2448, where the conclusion was reached in relation to a similar clause that the insured was indemnifying itself from being in a situation in which all elements of the clause were present, which apparently carried with it the notion that each of the elements might then individually give rise to indemnifiable loss. The consequence of adopting this approach in Hyper Trust (No 1) was that the loss caused by the insured peril was not negated by a counterfactual which included the presence of COVID-19: at [215]. That element was “stripped out” of the counterfactual as being part of the insured peril. McDonald J also adopted the proposition identified in FCA v Arch and JJ Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The ‘Miss Jay Jay’) [1987] 1 Lloyd’s Rep 32 to the effect that where there exist two concurrent proximate causes, one of which is insured and the other not, but not excluded, the concurrent proximate cause is also excluded in the counterfactual for the purpose of identifying the loss caused by the insured peril. His Honour concluded (at [220]) that, to the extent that COVID-19 may be a concurrent proximate cause of the plaintiff’s losses alongside the closures caused by the locally occurring outbreak of COVID-19, that concurrent factor must also be stripped out of any counterfactual. His Honour adopted the same approach (at [236]) in relation to the trend clauses in that case.
It can be accepted that a similar approach was identified by the minority in FCA v Arch (Lord Briggs JSC with whom Lord Hodge DPSC agreed) (at 756 – 758 [317] – [324]). Their Lordships’ obiter on this topic does not, with respect, add much to the discussion.
Mr Slattery QC submitted that this approach should be applied in the present case and that the sequential and composite insured peril can be dissected into its separate integers or elements, each of which may then provide a separate peril in respect of which an indemnity can arise. So the submission went it would follow that, if cl 3(c) applied in a particular case it would provide cover for all losses suffered by the insured regardless of whether they were caused by the closure of the premises. With the greatest respect, this amounts to a rewriting of the clause. As indicated above, the clause only operates where there has been (A) an infectious or contagious disease, as a result of which (B) an order is made by the relevant authority which (C) requires and causes the closure of the premises (D) which prevents or hinders the use of or access to the building or results in a cessation of trade due to a temporary falling away of potential customers, (E) in consequence of which there is interruption or interference with the business. That is symbolically represented as A→B→C→D→E in which the arrow between D and E represents the causing of loss. On the approach advanced by Mr Slattery QC, so long as those elements have occurred, the indemnity will extend to loss flowing from the general effects of the infectious disease regardless of the other elements; that is A→E.
A useful example of the difficulty which arises by the adoption of this approach can be derived from the primary judge’s reasons (PJ [1134]) where her Honour considered the scenario identified by the majority in FCA v Arch at 748 – 749 [281] – [286]. In that example, an insured has two sources of business, one is affected by an insured peril (restriction of access consequent upon COVID-19) although the other, being web-based sales, is not but is adversely affected by the occurrence of COVID-19. On the approach adopted by the Supreme Court and the primary judge, the indemnified loss is limited to that which flowed from the consequences of the insured peril and the indemnity does not extend to the loss from the web-based business. However, on the approach advanced by Mr Slattery QC, while the insured peril is occurring (being a restriction of access as a result of COVID-19) any losses flowing from the occurrence of the pandemic are recoverable regardless of whether they are caused by the closure of the premises. Such a result strongly suggests that the construction adopted has re-written the policy terms.
A further difficulty with the proposed construction is that it appears to permit recovery by the insured in respect of all losses caused by any element of the composite insured peril regardless of how long prior to the manifesting of the insured peril that damage was caused. With respect, that would be a rather bizarre result. It may be that the construction advanced by EWT was to apply in circumstances where the effect of COVID-19 generally and the consequences of a closure order occurred simultaneously, as seemed to be the scenario underlying the observations of McDonald J in Hyper Trust (No 1). Or it may be that the damage from COVID-19 generally is only available once all elements of the peril have occurred. However, if that is to be the intended result there is no mechanism in the policy which supports it.
There is, with respect, no commercial rationale for a reading of cl 3 which would have the result that EWT would be indemnified for losses which it sustained other than in consequence of the occurrence of the insured peril, which includes the closure of the premises.
Moreover, whatever may be the result where there exists simultaneous and concurrent causes of loss with one being a proximate cause covered by the policy, that can have no relevance to the circumstances of the present case where the uninsured peril of the Overseas Travel Ban had already occasioned the destruction of EWT’s business prior to the occurrence of the insured peril. On EWT’s case, once the closure orders were made, it was entitled to recover all the losses consequent upon the presence of COVID-19, including as occasioned by the Overseas Travel Ban regardless that, of itself, it could not give rise to indemnified loss and regardless that the insured peril did not occasion loss. No valid construction of the policy could orchestrate such a result.
It follows that the construction of cl 3(c) proffered by EWT as the foundation of Ground 7 should be rejected with the consequence that this ground also must fail.
Did the Overseas Travel Ban cause an interruption or interference with EWT’s business? – Appeal, Ground 6
By this ground EWT asserted that the primary judge erred by concluding that, even if the Overseas Travel Ban caused the closure of the premises, and thus satisfied cl 3(c), the requirement for interruption or interference with the business in consequence of the insured peril was not satisfied (PJ [1138]). This ground is partially dealt with above and relates to the construction of the expression “in consequence of” as specifying a relational effect between the insured peril and the loss. However, as EWT’s written submissions reveal, it is also centrally dependent upon the adoption of the construction contended for in Ground 7. Necessarily, this ground also fails as a result of the rejection of Ground 7.
Interest under s 57 of the Insurance Contracts Act – Appeal, Ground 8
The operation of s 57 of the Insurance Contracts Act had been dealt with earlier in these reasons. As EWT failed on its primary grounds of appeal, it follows that QBE is not liable to pay any amount to its insured and, therefore, it cannot be concluded that s 57 applies. This is, in part, for different reasons to those expressed by the primary judge. In the circumstances, the appropriate course is to amend the primary judge’s answer to the relevant question to: “Unnecessary to answer”.
Answers to the questions posed – Appeal, Ground 9
Apart from the primary judge’s answer to the question relating to interest, no other change is required to the primary judge’s answers to the questions posed by the parties.
QBE’s cross-appeal and notice of contention; EWT’s notice of contention
QBE cross-appealed in relation to the primary judge’s conclusion that s 61A of the Property Law Act (Vic) did not apply to the reference to “the Quarantine Act 1908 (as amended)” in the EWT policy and that, therefore, the exclusion in cl 3(c) did not apply in the circumstances. The inapplicability of s 61A to references to a Commonwealth Act in the policies has been considered earlier in these reasons, as has the conclusion that the Biosecurity Act was not a re-enactment with modifications of the repealed Quarantine Act. Each of those conclusions has the consequence that QBE’s cross-appeal and notice of contention fail. It is also not necessary to consider the issues raised by EWT’s notice of contention.
PROPOSED ORDERS ON THE APPEAL
The result of the foregoing is that the appeal be allowed in part and that there be a slight variation to the answers given by the primary judge. The orders should be as follows:
1. The appeal be allowed in part.
2. The cross-appeal be dismissed.
3.The primary judge’s answers to the questions posed by the parties be amended as follows:
Property Law Act
1. Does section 61A of the Property Law Act 1958 (Vic) apply to the policy, such that the reference to the repealed Quarantine Act 1908 (Cth) is to be construed as a reference to the Biosecurity Act 2015 (Cth), and such that a disease determined to be a “listed human disease” under the Biosecurity Act 2015 (Cth) falls within the scope of the exclusion from cover for business interruption?
No.
Prevention of access (POA) extension (page 12)
2. Was there “closure or evacuation of all or part of the [insured’s] premises” within the meaning of the policy?
No.
3. If the answer to 2 is ‘yes’, was it due to any one or more of the directions as set out in Annexures A and B of the Statement of Agreed Facts?
No.
4. If the answer to 3 is ‘yes’, was it an order by a competent government, public or statutory authority as a result of a human infectious or contagious disease?
This does not arise, but if it did arise all of the actions on which EWT relied were orders of a competent government, public or statutory authority as a result of a human infectious or contagious disease.
5. If the answer to 3 and 4 is yes, did the “closure or evacuation of all or part of the premises”:
(a)prevent or hinder the use of the insured’s building or access thereto; or
No.
(b)“result in” a cessation or diminution of trade “due to” the temporary falling away of potential customers?
No.
6. Was there “interruption or interference with” the insured’s business within the meaning of the policy?
No.
7. If the answer to 6 is yes, was the interruption or interference “in consequence of” closure or evacuation of all or part of the premises within the meaning of the policy?
No.
Loss
8. Whether, having regard to the answers to issues 1 – 7 above, the Policy responds to EWT’s claim for indemnity.
No.
Concurrent Causes
9. If the answer to issue 8 is “yes”, whether:
(a)the appropriate counter-factual for the purposes of the “Standard Income” definition in the Policy may take into account the presence and effect of COVID-19 as relevant circumstances, so that any payment to be made reflects the results that but for the insured events, would have been obtained during the relevant period (less any expenses saved as a result of the loss or damage); or
This does not arise.
(b)to the extent EWT suffered loss that was caused concurrently by events or circumstances referable to the outbreak of COVID-19 other than as a consequence of the matters set out in 2 to 7 above, the Prevention of Access Extension in the Policy covers EWT for the loss resulting from any such concurrent causes of that loss.
This does not arise.
Interest
10. Is interest under section 57 of the Insurance Contracts Act payable? If so from what date is interest payable?
This does not arise, but it would not be unreasonable for QBE to withhold payment unless and until it is finally determined to be liable to make payment in this proceeding.Unnecessary to answer.
4. The appeal otherwise be dismissed.
5. There be no order as to costs.
I certify that the preceding seven hundred and sixty-six (766) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Derrington and Colvin. Associate:
Dated: 21 February 2022
60
11
0