- Insurance Australia Group shares are under trading halt after the NSW Court verdict in favour of the insureds.
- IAG would look into the judgement’s impact on its business and evaluate the financial implications and the capital requirements.
- The trading halt would remain in place until the Company updates on the judgement’s financial implications and its capital position.
Insurance Australia Group Limited (ASX:IAG) has requested a trading halt related to its ordinary shares and its capital notes to enable the Company review the potential impact of the judgement of the New South Wales Court of Appeal passed on 18 November 2020. The decision was related to business interruption policies due to the COVID-19 pandemic.
The trading halt would remain in place until the earlier of regular trading commencement on 23 November or the Company’s release of a new announcement.
What was the judgement?
The NSW court on 18 November 2020 ruled that the exclusion of “quarantinable disease” that referred to the repealed Quarantine Act was not applicable to the pandemic. Insurance Australia Group has several business interruption policies referring to the Act.
IAG, along with other five insurance companies, stated that the policies intended to exclude pandemics. However, the position was rejected by five judges who were looking into this case.
The test case considered the operation of an infectious disease cover restriction in business interruption policies in situations where the cover restriction referred to the now abolished Quarantine Act 1908. The Court was specifically asked whether a reference to a quarantinable disease as per the Quarantine Act 1908 (which is presently repealed) and following adjustments should be seen as a reference to a listed human disease according to the Biosecurity Act 2015. If so, whether the listed human diseases were the ones determined when the policy was entered into or at any time throughout the insurance period.
However, the Court announced the verdict in favour of the insureds. The decision was based on the fact that reference to quarantinable diseases declared as per the Quarantine Act 1908 ‘and following amendments’ could be read as a reference to the quarantinable diseases declared as per Act immediately before it was revoked.
The Insurance Council of Australia, which brought forward this case along with the Australian Financial Complaints Authority (AFCA), indicated that the cases would be escalated to the High Court of Australia.
Although IAG requested a trading halt post the release of the NSW court’s verdict, QBE Insurance Group Limited (ASX:QBE) responded to the courts ruling and responded to the AFCA test case decision.
QBE said that its business interruption policies would require several triggers to be met before policyholders become eligible for indemnity for business interruption.