The realm of business interruption insurance is definitely a space to watch during these particularly confusing times, and Insurance Business sought the wisdom of Steadfast Group Limited managing director and chief executive Robert Kelly (pictured) to help make sense of the recent test case ruling.
“I think it’s a great outcome for the specific policies and for the specific circumstances that were put to the policy,” said Kelly. “I think that with business interruption insurance there are always different circumstances, so I don’t think it’s going to be some golden panacea for all business interruption claims.”
Additionally, the CEO thinks it will be interesting to see how plaintiff lawyers acting for insureds view the decision – whether they feel that it can be used as a form of ‘we think that’s really applicable’ and, as such, the insurer should pay, and if it doesn’t they run a new case with the exact circumstances.
Kelly told Insurance Business: “I think what it did was it gave an indication. I think what it has done is it’s given the AFCA (Australian Financial Complaints Authority) a really clear view of what the judiciary feels about those policies.”
In the Steadfast chief’s view, AFCA – which is neither a regulator nor a government agency – is not dictated to by law, per se, in that it is allowed to look at claims from the perspective of fairness.
“So I think if a claim were to be put to AFCA that had been denied by an insurer and AFCA felt [it fell] in the general clasp of what the judges said, that AFCA would still rule in favour of the insured,” he illustrated. “So I think that’s the parameters of how it would perceivably work going forward.”
The matter could be far from over, though, with Kelly acknowledging the fact that we remain in the dark as to whether insurers are indeed going to contest the judgement. He is, however, leaning towards a possibly more likely scenario.
The MD asserted: “My gut feeling is that they’re probably not going to appeal at this particular time. As you’ve seen, they have gone and raised substantial money from the market.
“So one would think that they didn’t raise that money on the basis of ‘we’re going to fight’; they probably raised that money on the basis of ‘well, we might as well settle it and get rid of it and go forward’.”
Meanwhile, Kelly also painted a picture of the claims escalation process.
“The insurers have got a situation where if [a claim] goes to their IDR (internal dispute resolution) and the IDR rejects the claim and then it goes to AFCA, then they’re in a differently charted territory with AFCA who, as I say, is not necessarily bound by the letter of the law but more particularly bound by the fairness of the situation,” he explained.
“And I think if you apply the fairness rule, then the only dictum you’ve got is the court case.”