COVID-19 and the enforceability of Quarantinable Diseases Exclusions

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By Louise Cantrill, Partner, and Melanie Fayad, Lawyer

Business interruption insurance often provides coverage if business premises are forcibly closed by authorities due to an outbreak of an infectious disease, but diseases which are “quarantinable diseases” under the Quarantine Act 1908 (Cth) (“Quarantine Act”) or “listed human diseases” under its replacement legislation, the Biosecurity Act 2015 (Cth) (“Biosecurity Act”) are usually excluded.

On 21 January 2020, Human Coronavirus with Pandemic Potential (COVID-19) was declared a Listed Human Disease under the Biosecurity Act.[1] However, some wordings in the market continue to refer to an exclusion for “quarantinable diseases” under the Quarantine Act and the wording has not been updated to refer to the Biosecurity Act. Are these exclusion clauses effective?

Replacement of the Quarantine Act by the Biosecurity Act

The Quarantine Act was formally repealed by the Biosecurity (Consequential Amendments and Transitional Provisions) Act 2015 (Cth) (“Biosecurity Transitional Act”). Pursuant to Schedule 1 of the Biosecurity Transitional Act, the Quarantine Act was repealed in whole as from 16 June 2016.[2]

At the same time, the separate Biosecurity Act came into force. This Act now encapsulates all the powers to declare a disease quarantinable and to take steps to secure public health and safety that were previously contained in the Quarantine Act.

The explanatory memoranda to the Bill which preceded the Biosecurity Transitional Act clearly specifies that the Biosecurity Act is intended to replace “the Quarantine Act 1908 as the Commonwealth‘s primary biosecurity legislation”.[3] In addition, it is apparent from a simple search of the Federal Register of Legislation or the Parliamentary Bills that the provisions under the Quarantine Act have been replaced by the Biosecurity Act.

Does this mean reference to the Quarantine Act simply be taken to mean a reference to the Biosecurity Act? Maybe not. Exclusion clauses which only refer to “quarantinable diseases under the Quarantine Act 1908”, without more, may be unenforceable given this legislation has been repealed, and diseases are no longer declared “quarantinable” under this legislation.

Further, exclusion clauses which refer to “quarantinable diseases under the Quarantine Act 1908 and subsequent amendments” may not be enough to fix the problem. The Quarantine Act has not been amended – it has been repealed altogether. Such wording may be read narrowly to capture changes to that Act only and not the repeal of that Act.[4]

On the other hand, it is very clear that a “listed human disease” under the Biosecurity Act is now the legislative replacement for a disease declared to be a “quarantinable disease” under the Quarantine Act. The insurer’s intention to exclude cover for such notifiable diseases is clear to the insured, and the effect of the exclusion is the same, regardless of the Act referred to. Therefore, insurers have a reasonable basis to rely on the wording of these exclusion clauses as enforceable, subject to the context and other provisions of the policy.

The situation is clearer for exclusion clauses that refer to the Quarantine Act and then make use of additional words such as “or any replacement” or “or its current equivalent”. Such exclusion clauses are unlikely to be unenforceable solely because the wording does not refer to the Biosecurity Act.

Conclusions

As can be seen above, there is no clear cut “yes” or “no” answer to whether these problematic exclusion clauses, which only reference the Quarantine Act, are enforceable. There remains the risk these exclusion clauses may be successfully challenged by insureds.

The situation is clearer for exclusion clauses that refer to the Quarantine Act and then make use of additional words such as “or any replacement” or “or its current equivalent”. Such exclusion clauses are not likely to be unenforceable solely because the wording does not refer to the Biosecurity Act.

The above advice is necessarily general in nature, and subject to the specific wording of the insurance policy and the context of the claim. If you are require further assistance in considering specific policy terms, please do not hesitate to contact us.

[1] Director of Human Biosecurity, Biosecurity (Listed Human Diseases) Amendment Determination 2020 (F2020L00037, 21 January 2020).
[2] Biosecurity (Consequential Amendments and Transitional Provisions) Act 2015 (Cth) sch 1.
[3] Explanatory Memorandum, Biosecurity (Consequential Amendments and Transitional Provisions) Bill 2014 (Cth) 4.
[4] Attorney-General (WA) v Marquet (2003) 217 CLR 545, 591.

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