Latest News

Back to Latest News back


Federal Court rules against business interruption insurance policy holders in test case on Coronavirus payouts

Federal Court rules against business interruption insurance policy holders in test case on Coronavirus payouts
October 8, 2021

A Federal Court decision on a crucial test case on whether insurance companies’ business interruption insurance policies cover payouts for financial losses incurred during COVID has found overwhelmingly found in favour of the insurance industry.

In what for Maurice Blackburn principal lawyer Josh Mennen called a "a major setback" for small businesses, Federal Court ruling has that found a range of insurance policies did not cover policy holders for financial losses during COVID.

As a result, it means insurers look set to be able to avoid paying out billions of dollars in claims of policies that small businesses hoped would cover them for losses as a result of Coronavirus interruptions.

The Federal Court today ruled that the majority of nine business interruption (BI) policies put before it for scrutiny would not need to be paid out by the insurers.

Mennen commented "it's not the end of the road for all claims but it significantly narrows the field.

"Obviously, as a consumer advocate, it's a disappointing result."

Business interruption insurance has emerged as a controversial space during the pandemic, with insurance companies claiming they never intended for these sorts of policies to cover pandemics.

Estimates suggest that over 200,000 business in Australia had business interruption insurance policies when the pandemic struck, with a total potential liability of $10 billion.

Friday's test case looked at under what terms a business could claim for downturn in trade during the pandemic, including if a government lockdown order was sufficient or whether a business needed an actual case of the virus in its proximity to claim.

Mennen noted “the Court's narrow interpretation means that claims under similar policies will need to show a direct connection between COVID outbreaks on or nearby the premises and the government restrictions that caused loss of trade.”

That essentially means a business cannot be compensated if it can only prove its losses were due to government lockdown or a general economic downturn caused by the closure of international borders.

That will make it very difficult for a range of businesses to claim insurance, including those tourism as well as in entertainment,

Ruling impacts Melbourne-based gym group
Melbourne-based fitness group Results Based Training is one business that has faced significant losses due to Victoria's extended lockdowns in 2020 and 2021, and that has business interruption coverage with, QBE, one of Australia’s major insurers.

Co-owner Liv Jones told the ABC "I don't think there's a person, particularly in Victoria, that wouldn't understand how important a payout is for small business right now. The impacts have been long and almost immeasurable

"The payout for this would be an opportunity for us to reset after a very stressful 18 months and a lot of debt.

"This is never the decision you want in our position. It already feels like David versus Goliath.

"We all knew this would be an argument fought on all fronts with absolute enthusiasm. There's a lot at stake for everybody involved."

With an appeal already being lodged against today's Federal Court decision, Jones, whose Results Based Training group has 13 gyms in Victoria and Western Australia, added “we're very confident in the appeals process. It's just a few weeks. We've been in this for 18 months

"On both sides, we'll will be fighting tooth and nail for each individual party."

The insurance industry lost another test case on appeal earlier this year. That was due to muddled clauses in policies that saw an old piece of legislation not replaced by newer laws.

The Federal Court ruling also ruled that the size of insurance payouts for businesses could be reduced if they had also taken government subsidies including JobKeeper or rental abatements.

Justice Jayne Jagot explained “those payments would therefore reduce each of the insured's loss.”

In a statement, the Insurance Council of Australia (ICA) said the decision upheld the insurers' arguments in eight of the nine matters in the test case put before it.

ICA Chief Executive, Andrew Hall stated “we welcome today’s judgment of the Federal Court, which provides an important step towards finalising these matters.

"Insurers, including those not directly involved in the court proceedings, are committed to applying the principles of the courts' final ruling consistently and efficiently to all business interruption claims."

Two class actions have already been lodged by an Australian legal firm against industry giant QBE and the overseas insurer Lloyds over its refusal to pay out BI policies to small businesses and a speciality range of jewellers.

Lower image: Travis Jones and Liv Jones of Results Based Training.

Related Articles

8th October 2021 - Fernwood Fitness looks to reopen Greater Sydney and NSW clubs at midnight on Monday

7th October 2021 - Exerp explains inclusion of government mandates in fitness clubs’ reopening processes

6th October 2021 - VIC Active takes political sides in urging fitness sector to back state opposition

1st October 2021 - Fitness Australia looking for guidance on vaccination requirements for reopening NSW gyms

30th September 2021 - FITREC gives fitness professionals option to show that they are fully vaccinated for COVID-19

14th September 2021 - Fitness Australia’s Barrie Elvish ‘perplexed’ by ongoing restrictions on operation of exercise facilities in regional Victoria

12th September 2021 - How confident can fitness businesses be in AI predictions?

9th September 2021 - New Les Mills Global Fitness Report suggests members ready to ‘flock’ back to facilities

3rd September 2021 - Cancellations caused by ongoing lockdowns sees income of Victorian event businesses fall by 80%

24th August 2021 - Lockdowns see closure of all ski resorts in Australia and New Zealand

20th August 2021 - Melbourne 24/7 gym continues to charge member fees during lockdown

18th August 2021 - Industry resigned to ongoing lockdown closures

6th August 2021 - New and expanded lockdowns impact more than half of Australia

3rd August 2021 - CrankIt Fitness announces free access to online courses during lockdown

4th May 2021 - Small businesses in Northern Australia to benefit from Federal Government reinsurance pool

1st April 2021 - LPA calls for emergency Business Interruption Fund after government directive shuts down Bluesfest

25th March 2021 - Victorian gym owner takes legal action against insurer for refusing Coronavirus compensation payout

12th January 2021 - Sportscover partners with Sport Climbing Australia to offer insurance for climbers

29th December 2020 - Ombudsman’s report calls for action in addressing ‘national crisis’ in insurance coverage

16th November 2020 - Industry operators impacted by rising insurance premiums

18th April 2019 - Result Based Training fitness group enters administration after ‘very large’ tax bill

Support our industry news service
We hope that you value the news that we publish so while you're here can we ask for your support?

As an independent publisher, we need reader support for our industry news gathering so ask that - if you don't already do so - you back us by subscribing to the printed Australasian Leisure Management magazine and/or our online news.

Click here to view our subscription options.


supplier directory

The Complete Guide to Leisure Industry Products & Services.

See the directory see all

SeatGeek Asia Pacific

SeatGeek is a search engine and mobile-focused ticket marketplace that allows fans to buy and sell tickets for live events. As of August 2018, SeatGeek has exited the Australian, New…

read more

Entertainment / Sport / Technology / Ticketing / Venues



With its sleek good looks and easy-to-use yet powerful functionality, Envibe is the premium fitness club software for the Australasian leisure, recreation and fitness industry. We are the most…

read more

Aquatics / Fitness / Recreation / Technology


Smart Connection Consultancy

Smart Connection Consultancy is a boutique sport and recreation consultancy who has become one of Australia’s leading advocates for the use of synthetic sports surfaces as a vehicle to grow…

read more

Consultants / Recreation / Sport / Surfaces


Altitude Training Systems

ATS are global leaders in altitude training and research. From mask systems and inflatable tents to simulated altitude facilities, we help all athletes gain the competitive edge. Our…

read more

Fitness / Sport / Technology



Centaman has been a market leader in Enterprise Software Solutions for the leisure and recreation industry and both profit and not-for-profit attractions since 1991. It offers a wide range of software…

read more

Access / Billing / Fitness / Technology / Ticketing



Vticket Pty Ltd is the Australian and New Zealand distributor for Gateway Ticketing Systems Inc., the world leader in high-speed access control, admission control and ticketing software for the…

read more

Attractions / Security / Technology / Ticketing / Venues


Yellowbox Lockers

Yellowbox is an Australian technology company that has developed smart locker technology operated through an app with a focus on experience for users and facility managers. Found at Beaches, Aquatic…

read more

Aquatics / Attractions / Entertainment / Retail / Security



AUSTRALIAN MADE. FIT FOR PURPOSE. Based on the Gold Coast, AlphaFit is a leading manufacturer and supplier of Australian gym equipment specifically for the commercial, strength and conditioning,…

read more

Fitness / Recreation / Sport / Technology / Wellness


get listed with our suppliers directory

Get your business noticed in our targeted directory. Viewed by 10,000 industry professionals per week!

list your business