Updated: 24 August 2023

The Australian Financial Complaints Authority (AFCA) has issued its first decisions in business interruption insurance complaints that had been on pause while test cases settled the interpretation of certain policy wordings in regard to the COVID pandemic. 

You can read these first decisions here and here. While each decision depends on the particular circumstances of the complaint, these first determinations show broadly how the test cases may apply. 

These complaints, and others, had been on hold while AFCA awaited the final outcome of a series of legal actions by insurers and businesses affected by COVID lockdowns.  

The legal actions included an initial hearing of a test case in the NSW Supreme Court, a second test case hearing on different issues by the Federal Court, an appeal to the Full Court of the Federal Court, and then an application to the High Court for special leave to appeal. 

After the High Court declined that leave to appeal, AFCA was able to begin considering the cases that had been placed on hold because they involved questions the courts were considering.  

At AFCA, each case must be considered individually, according to its particular facts and circumstances, and this process is now under way for each of the cases that was affected by the test case in the Federal Court.  

Further decisions, also known as determinations, will be made soon. 

AFCA has now resolved about a third of the BI insurance complaints relating to the COVID pandemic lodged with us. Those not able to be resolved by agreement between the parties generally will be referred to a panel for decision once all relevant information is exchanged. 

About 100 other complaints lodged with AFCA remain on hold because they could be affected by class actions still pending in the Federal Court. AFCA will remain in contact with affected complainants.  

As at the beginning of May 2023, AFCA had received a total of 359 COVID-related business interruption insurance complaints since the start of the pandemic in 2020, of which 202 remained open.   

As always, AFCA encourages financial firms to seek to resolve complaints through their internal dispute resolution processes.   

AFCA and test cases

Under the AFCA Rules, a member financial firm must seek AFCA’s consent to bring a test case about a matter that would otherwise be handled by AFCA as a complaint.

AFCA cannot initiate its own test case and, once it provides approval to the member firm, it is not involved in the filing or running of a test case or any appeals. AFCA does not provide any financial, legal or other support.

One of the factors considered before agreeing to allow a member firm to treat a complaint as a test case is whether there are important issues of law to be decided.

In addition, the financial firm must meet AFCA requirements such as agreeing to pay the complainants’ legal fees incurred in the test case.


Test Case 1

You can read the NSW Court of Appeal judgment in the first test case here.  

Test Case 2

A full copy of the Federal Court judgment, delivered by Justice Jagot on 8 October 2021, and summary is available here:

A full copy of the Full Court judgment, delivered on 21 February 2022, and a summary is available here:

Full Court of the Federal Court Judgment Summary: Second test case

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