The Federal Court of Australia has handed down judgment in a case concerning the application of an exclusion relating to Covid-19.
The Federal Court of Australia (Court) was called upon to determine the application of a policy exclusion (summarised below) regarding whether:
- COVID-19 is a communicable disease;
- if yes, the loss caused by cancellation of a music festival event in March 2020 directly or indirectly arose out of, was contributed to or resulted from:
- the imposition of quarantine or restriction in movement of people or animals by any national or international body or agency; or
- any travel advisory or warning being issued by a national or international body or agency.
The Court found (in the respondent insurer’s favour) that the answers to all of the above questions were “yes”, and the exclusion was engaged.
Outback Music Festival Group Pty Ltd (applicant) was the organiser and promoter of “the Big Red Bash”, a festival scheduled to take place in the Simpson Desert in July 2020 and which, it was projected, would draw approximately 10,000 attendees, of which 65% were expected to come from interstate. On 24 March 2020, the applicant’s director decided to cancel the event in light of the COVID-19 pandemic, attendant health and safety concerns, and a number of operational issues resulting from the closure of State borders, the imposition of travel restrictions and travel warnings and other related considerations.
The applicant’s insurance broker notified the respondent (insurer) of a claim, under its Event Cancellation insurance policy (Policy) for AU$3,182,444 as a result of the cancellation of the event (Claim). Clause 6.20 of the Policy (exclusion) contained the following exclusion:
“This Insurance does not cover any loss directly or indirectly arising out of, contributed to by, or resulting from
any communicable disease or threat or fear of communicable disease (whether actual or perceived) which leads to:
(6.20.1) the imposition of quarantine or restriction in movement of people or animals by any national or international body or agency;
(6.20.2) any travel advisory or warning being issued by a national or international body or agency.”
The respondent relied upon the exclusion to decline cover for the claim under the Policy.
The decision at trial
Allsop CJ held that the insuring clause of the Policy was engaged since, on any view, the event had to be cancelled. The only issue arising was whether the exclusion was also engaged.
In relation to the first sentence of clause 6.20, His Honour found that COVID-19 is a communicable disease.
In relation to paragraphs 6.20.1 and 6.20.2 of the Exclusion, His Honour reviewed several releases issued by the Federal Government of Australia, as well as the State and Territory Governments, and concluded that the Federal Government had issued entry and movement restrictions on persons entering Australia as a result of COVID-19, the State and Territory Governments had all imposed border and movement restrictions as a result of COVID-19, and National Cabinet and the State and Territory Governments had urged Australians to refrain from non-essential travel as a result of COVID-19. This meant that both limbs of paragraphs 6.20.1 and 6.20.2 of the exclusion were satisfied.
His Honour also accepted that National Cabinet, whilst not a sub-committee or part of Federal Cabinet, was a national body within the meaning of clause 6.20 of the Policy.
Accordingly, His Honour found that the respondent was entitled to decline cover for the Claim under the Policy, in reliance on the exclusion.
Implications for you
Whilst the decision is specific to the terms of the Policy in question, it reinforces the fact that:
- The COVID-19 pandemic, even in its early stages, was a serious event resulting in the imposition of sufficiently significant restrictions as to movement and entry in to Australia, such that appropriately-worded quarantine/outbreak of disease exclusions are likely to apply even at that early stage; and
- Australian courts will adopt a plain language and business-like approach to the construction of exclusions, which is not unduly restrictive.