Businesses have been hit with plenty of disruptions over the past few years, from COVID as well as from natural disasters.

The lower house of the NSW Government has passed a Bill repealing an amendment to the Workers Compensation Act 1987 made last year in response to the COVID-19 pandemic, potentially saving businesses more than half a billion dollars in insurance premiums increases.

In July 2020, the Government passed Section 19B to the Act, which included a presumption that workers in certain industries who contracted COVID-19 had done so at work, meaning they could automatically receive workers compensation.

The amendment covered workers in industries such as healthcare, education, retail, transport, emergency services, construction, disability and aged care, dining and entertainment.

The NSW Government says that there is nowhere else in the world with automatic workers compensation rights due to COVID-19 that are as broad as those in NSW.

Similar legislation is in place in WA, where healthcare workers don’t have to prove they caught the virus while in the workplace, while the onus is on employees to prove they caught COVID-19 at work to be eligible to receive workers compensation in all other Australian states and territories.

On average, workers compensation entitlements pay employees around 80% of their earnings if they’re unable to work, while the family of employees who contract COVID-19 in the workplace and subsequently die from the disease generally receive around $1 million in compensation.

Repealing the amendment means that NSW workers will now be required to prove they contracted COVID-19 at work to gain access to workers compensation.

“Now we know more about COVID-19 and its transmission, amendments under Section 19B of the Act must be repealed so the workers compensation system is both fair to employees and ensuring businesses aren’t hit with an unexpected spike in their insurance bills,” NSW Premier Dominic Perrottet said. “Now that the economy is steadily reopening, we want businesses investing in new staff and higher wages, not inflated insurance bills.”

Recent estimates based on Doherty Institute modelling indicated that COVID-19 claims could have cost the NSW workers compensation system up to $638 million over the coming year, with more than 25,000 extra claims.

The Government says small businesses could have seen an average increase in their workers compensation insurance premiums of $950, had the legislation not been repealed.

However, there are concerns around how the change could affect workers who don’t contract the disease at work, or are unable to prove they did catch it at work, and end up suffering from long COVID, as questions have been raised over whether sick leave provisions would cover an extended period off work.

The Bill is yet to be heard by the NSW upper house.

A new decision provides more guidance in Australia around whether business interruption insurance policies cover businesses for losses related to COVID-19.

On 8 October 2021, the Federal Court of Australia handed down its first instance decision in the second Australian business interruption insurance test case, Swiss Re International Se v LCA Marrickville Pty Limited [2021] FCA 1206 (Second Test Case). The decision is the latest judicial guidance in Australia around whether certain business interruption insurance policies provide cover to businesses for losses arising from Novel Coronavirus SARS-CoV-2 (COVID-19).

After the First Test Case, which addressed whether a specific exclusion in business interruption insurance policies would exclude COVID-19-related losses, the market identified a number of outstanding questions in those policies which required legal guidance. In the Second Test Case, Justice Jagot in the Federal Court addressed those issues in detail.

In short, the Court identified four types of insuring clause (and policy extensions) under which claims for COVID-19 business interruption losses could arise. Only one of those clauses – the ‘Disease Clause’ – could entitle a business to activate its policy according to the Second Test Case. As to the other three, the Court found that closure or restriction orders from the Commonwealth or State Governments were not made as a result of disease, damage or threat at or near the insureds’ premises.

As such, cover was not available to the insureds under those clauses. It also found that COVID-19 was not a ‘catastrophe’ in the context of the particular insurance policies examined, so that clause also would not provide cover to the insureds.

Following this decision, many policyholders are still asking the question ‘will my policy respond?’

The answer remains that it will depend on the policy in question, coupled with the particular facts giving rise to a claim.

The outcome in this decision is on appeal, and we will be reporting further on developments following the appeal.

The Insurance Council of Australia (ICA) welcomes the commencement today of the second business interruption test case hearing before the Federal Court of Australia.

The hearing brings insurers and policyholders a significant step closer to having clarity and certainty on a number of key issues relating to pandemic coverage in business interruption policies.

The second test case, which is scheduled to run until 15 September, will determine the meaning of policy wordings around disease definition, Covid-19 outbreak proximity, the impact of government mandates, and other policy wording matters.

It consists of nine small business claims from a range of business sectors and locations lodged with Australian Financial Complaints Authority as part of its dispute resolution process.

At the same time, the Federal Court will hear a separate case brought by QBE regarding the interpretation of Victorian property legislation which has the potential to impact business interruption policies written under Victorian law.

Insurers represented in the second test case are Allianz, IAG, Chubb, Guild, and SwissRe Corporate Solutions, however all Insurance Council members have committed to applying the rulings of the courts in this and the first business interruption test case in a consistent way when assessing business interruption claims.

The industry will meet the costs of policyholders in the second test case, as it did in the first test case.

A live video stream of the hearing is available here.

Comment attributable to ICA CEO Andrew Hall:

The commencement of the second business interruption test case hearing is an important step towards finalising this issue and providing an efficient, transparent, and consistent framework to process business interruption claims.

Insurers acknowledge the frustrations of policyholders who have been waiting to have claims resolved, however the unprecedented nature of this pandemic has meant court determinations have been necessary to establish the principles insurers need to process claims and resolve disputes.

Insurers have taken a number of steps to ensure these claims will be prioritised when final rulings are made.

If policyholders believe they have a claim against their business interruption cover they are encouraged to contact their insurer or broker who will provide them with the information they need to lodge.

The Fair Work Ombudsman has adopted a new four-tiered approach for mandatory vaccinations in Australian workplaces, and moved away from its earlier advice that employers are “overwhelmingly” unable to introduce mandatory vaccinations policies.

While public health orders have been issued in some regions that require those working in health services and quarantine facilities to be vaccinated, the federal government has maintained its position that vaccination will generally be voluntary for Australians.

In updated guidance issued on Thursday evening, the Fair Work Ombudsman set out four tiers of workplaces and their likeliness of being able to mandate vaccines for workers. Workplaces considered to be Tier 1 would be “more likely” to be able to mandate vaccines, while those considered to be Tier 4 would be least likely to be able to require workers to be vaccinated.

Tier 1 applies to workplace where employees interact with people who have an increased risk of COVID-19 infection, such as those working in hotel quarantine and border control settings.

Tier 2 includes settings where employees are required to have close contact with individuals who are particularly vulnerable to the health effects of the virus, including those working in health or aged care.

Tier 3 covers public-facing work environments, such as stores providing essential goods and services, where employees are likely to interact with members of the public in their normal duties.

Tier 4 applies to work environments where employees have minimal face-to-face interaction with members of the public. This includes work that is completed at home.