A Melbourne café owner has lost a legal stoush with insurance giant Suncorp (ASX: SUN) in a business-interruption claim stemming from the COVID-19 lockdown earlier this year.
The Federal Court has ruled that the owners of Vanilla Lounge café were legitimately subject to a pandemic exclusion in their policy with Suncorp subsidiary Vero Insurance.
The case has been closely watched by the insurance industry over fears that it could lead to a rush of new claims should it succeed.
Vanilla Lounge had argued that the Biosecurity Act upon which the Suncorp exclusion is based, was a federal jurisdiction but that Victoria's lockdown in March this year was imposed independently of this legislation.
The Suncorp policy excluded any claim directly or indirectly caused by the highly pathogenic Avian influenza or any biosecurity emergency or human biosecurity emergency declared under the Biosecurity Act 2015.
However, the court found that through this exclusion, Suncorp was not liable for business losses by the insured.
Suncorp says the court's interpretation is consistent with the company's position that cover for a pandemic represents a high risk for an insurer which would normally be excluded from business insurance policies.
The company confirms that, as a result of the ruling, its overall reserve related to COVID-19 continues to be adequate, although it says this doesn't take into account the potential for further lockdowns or negative outcomes from future test cases in the industry.
"Suncorp is committed to working with government, industry and the broader community to explore alternative frameworks to addressing pandemic risks," says Suncorp CEO Steve Johnston.
"We recognise these are challenging times for small business and we have put in place a range of measures to support them through this period.
"Unfortunately, pandemics are an uninsurable risk and premiums have not been paid to cover an event of the scale of COVID-19."