Two suits – one against Australian insurance company QBE and another against London-based Lloyds – are being run by litigation lawyer Andrew Grech of Gordon Legal.
Gordon Legal was founded by high-profile lawyer Peter Gordon and specialises in class-action claims in Australia and overseas, including the US.
The National Opal Collection (NOC) – the retail arm of Cody Opal Australia, with premises in the Sydney and Melbourne CBDs – had taken out a business interruption policy underwritten by AXA and Lloyds prior to the pandemic. It has now joined the Lloyds class action.
As previously reported by Jeweller, Damien Cody, director Cody Opal Australia, has publicly challenged insurance companies for refusing to offer compensation to small businesses with interruption policies.
The NOC’s business interruption policy included a clause providing coverage in the event of an “outbreak of a notifiable human infectious or contagious disease occurring within a 20 kilometre radius of the [premises]”.
However, a claim against the policy was rejected in May 2020, with the insurer asserting that the business’ losses – which Cody estimates total more than $3 million – would need to have occurred as a consequence of COVID-19 cases within 20km of the premises, rather than “overarching factors resulting from the COVID-19 pandemic as a whole”.
In January, Cody told Jeweller, “Policyholders expect that [insurance companies] would act empathetically, ethically and professionally in responding to claims by small businesses suffering extreme losses as a result of COVID-19.”
The ABC reports that the QBE and Lloyds class actions are the first in Australia regarding pandemic insurance payouts.
"We’re determined to take them on. Maybe the insurers were not expecting a worldwide pandemic. But nonetheless we’ve been paying a lot of money for many years taking out business interruption insurance and the pandemic did hit,” Cody told the ABC.
"It's hit my company and many others like mine very hard. We've lost 98 per cent of our revenue. We’re relying on a dribble of revenue via internet sales.
“It’s been horribly exhausting. We’ve had 20 staff we had to stand down. They’re people who had been with us many years. It's certainly made me feel determined to see justice prevail,” he added.
While Grech estimates 25,000 policyholders are eligible to join the QBE suit, approximately 100 businesses in Australia are believed to be covered by Lloyds’ specialist policy.
Insurers have argued that business interruption policies were not intended to cover pandemics but rather localised outbreaks such as Legionnaires’ disease, and that their exclusion clauses must stand, despite frequently referring to outdated legislation.
The Insurance Council of Australia estimates that if the exclusion clauses are not upheld, some 250,000 policies may be eligible for claims, which could total $10 billion – an amount for which the industry does not carry sufficient reserves.
More reading:
Australian opal dealer challenges COVID-19 insurance rejection
ABC: Small businesses take on insurance giants QBE and Lloyds in COVID pandemic class action