Insurance Australia Group (IAG) has provided a new update on the ongoing class action involving business interruption (BI) policyholders.
On Sept 20, 2024, the Federal Court of Australia expressed its intention to decertify the class action brought against Insurance Australia Limited (IAL), IAG’s subsidiary, over BI policies.
The court plans to conduct a further case management hearing to finalise orders for the decertification. These orders will include conditions such as notifying group members about their right to individually pursue any claims and making certain orders in line with earlier findings in BI test cases.
IAG has stated that additional updates will be issued as the case progresses. A date for the next hearing has not been set, and the representative applicant may seek leave to appeal the judgment or any future orders.
In response, IAG welcomed the court’s decision and encouraged customers with BI coverage affected by COVID-19 to submit claims for assessment through its regular claims process.
The class action is part of a broader set of legal challenges related to BI claims arising from the COVID-19 pandemic.
IAG has been involved in separate legal proceedings since November 2021, when law firm Quinn Emanuel Urquhart and Sullivan filed a lawsuit in the Supreme Court of Victoria. The firm is representing shareholders who claim they suffered losses after IAG’s market capitalisation fell by $800 million following its disclosure of policy wording issues and subsequent capital raising efforts.
Quinn Emanuel alleges that IAG failed to adequately disclose the potential consequences of outdated BI policy wording, which referred to the repealed Quarantine Act of 1908. That act was replaced by the Biosecurity Act in 2015, and insurers have faced legal challenges over the use of outdated language in pandemic-related exclusions.
In 2021, the New South Wales (NSW) Court of Appeal ruled that references to the repealed Quarantine Act did not exempt insurers from covering pandemic-related claims. This decision forced IAG to increase its provisions for potential COVID-19 claims. In July 2021, IAG initially set aside $100 million, but by November 2021, it raised the provision to $865 million, reflecting the potential impact of the court’s ruling. The company also raised $750 million in capital to manage anticipated claims.
IAG has confirmed that it intends to defend the class action and manage related claims in line with court rulings. It continues to emphasise that policyholders with BI coverage affected by the pandemic should lodge claims for assessment.
As the legal processes unfold, IAG remains engaged with the courts while addressing claims tied to both business interruption policies and shareholder losses, it said.
