Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance
Rockment Pty Ltd v AAI Limited Background
In light of the COVID-19 pandemic, insurance and what insurance should and should not extend to has become a heavily debated topic. The recent decision of Rockment Pty Ltd v AAI Limited by the Federal Court of Australia provides further clarity on this issue.
The applicant, Rockment Pty Ltd t/a Vanilla Lounge (‘Rockment’) made a claim under their business interruption policy for losses that it claimed were suffered from the Victorian COVID lockdowns. The respondent, AAI Ltd t/a Vero (‘Vero’) denied that Rockment were covered under their policy, and subsequently Rockment commenced proceedings against Vero in the Federal Court of Australia.
Vero’s insurance policy had an exclusion clause, which provided as follows:
We will not pay any claim that is directly or indirectly caused by or arises from, or is in consequence of or contributed by:
… any biosecurity emergency or human biosecurity emergency declared under the Biosecurity Act 2015 (Cth), its subsequent amendments or successor, irrespective of whether discovered at the premises or the breakout is elsewhere.
The Court considered whether Rockment’s insurance claim would be excluded under Vero’s policy, as COVID-19 was a human disease specified in a declaration of human biosecurity under the Biosecurity Act 2015 (Cth) (‘Biosecurity Act’).
Importantly, although COVID-19 was listed as a disease under the Biosecurity Act, Rockment was also the subject of excessive business interruption as a result of the many directions delivered by the Victorian Chief Health Officer (‘CHO’) issued under the Public Health and Wellbeing Act 2008 (Vic) (‘PHWA’).
Consequently, Rockment proceeded with the insurance claim arguing that the claim was made for losses incurred following from directions made under the PHWA. Vero denied that the claim was valid and contended that the PHWA directions resulted from a disease declared under the Biosecurity Act, which the exclusion clause would cover.
Decision of the Full Court of the Federal Court
The Court held that Vero’s exclusion clause under the Biosecurity Act did not apply. The Court determined this with consideration to whether the Victorian CHO directions resulting in claims for loss and damage were directly or indirectly a consequence of a disease under the Biosecurity Act.
Vero argued that the insurance claim was linked with a government ordered business closure to Rockment’s premises caused by a Commonwealth declared emergency, and this would fall within the scope of the exclusion. However, because the lockdowns were not imposed by the Australian Government under the Biosecurity Act, the Court found that the exclusion clause would not apply to the Victorian lockdown.
The result was that Rockment were successful on its claim as the Victorian COVID-19 directions and lockdowns were decisions made by the State and not the Australian Government.
Key takeaway’s from the decision and this case
- Rockment is a landmark decision for businesses impacted by COVID-19 and paves the way for insurance claims being brought by businesses which suffered large financial loss due to state lockdowns.
- For advice in relation to whether your business may make a claim for loss and damage under its business interruption insurance policy, please contact uson 1300 749 709 to see how one of our experienced litigation lawyers can assist you.
- For further reading on cases regarding insurance policies in light of COVID-19, see our case note on HDI Global Speciality Se v Wonkana No. 3 Pty Ltd.
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