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‘Further blow’ for small businesses awaiting insurance payouts for COVID-related losses

After almost two years withstanding lockdowns, a downturn and the rise of online fitness training, Olivia Jones and her partner are calling it quits on their chain of gyms, Result Based Training.

The couple spent the past decade building up a network of fitness studios in Victoria and Western Australia.

They put their holding company into liquidation on Friday.

“I’m still a bit numb,” Ms Jones said.

As they struggled to keep the company afloat, the couple were running a second battle with their insurer, QBE, to get a payout for business losses during the pandemic.

The couple had a business interruption (BI) policy when COVID-19 struck two years ago.

It is estimated there were roughly 250,000 policies of this ilk in early 2020 with a total potential liability of $10 billion.

But insurance giants say they never intended for these sorts of policies to cover pandemics.

A long legal battle is still underway to clarify that position, and the wait for business owners like Ms Jones has been agonizing.

Asked if a payout by now would have prevented their liquidation, Ms Jones was signed.

“Yes,” she said.

However, some lawyers say it is looking increasingly unlikely that many businesses will ever get a payout.

Latest legal battle divides lawyers

In October, a test case of the matter in the Federal Court was largely hailed as a win for the insurance industry’s position that it was not obliged to pay out COVID-related losses.

On Monday, an appeal into that matter was handed down in a long and complicated decision. A summary indicates it largely upholds the October outcome.

Maurice Blackburn principal lawyer Josh Mennen said the latest legal outcome was not good for small businesses awaiting an insurance payout.

“There is still the prospect of a High Court appeal, but for many insured businesses the outlook is now more pessimistic,” he said.

“This is a further blow for the thousands of insured businesses who suffered during pandemic closures.”

The saga ran alongside another test case, which contradictorily was hailed as a win for small businesses because it upheld claims that many policies had muddled clauses.

Andrew Hall says he is aware claimants have faced a long wait.(ABC News: David Maguire)

The industry’s lobby group, the Insurance Council of Australia (ICA), said business owners’ claims were still being determined based on the final applicable principles of both test cases.

“These matters are not clear cut and we acknowledge that this has been a long but necessary process that will ultimately provide important guidance on how business interruption policy wordings are to be interpreted and applied,” ICA chief executive Andrew Hall said.

For Ms Jones, the wait for clarity has been unacceptable.

“This just seems to be dragging out for such a long time,” she said.

Her company’s insurer QBE was approached for comment.

Lawyer says businesses still have a case

While lawyers like Mr Mennen say the chance of businesses getting insurance payouts is dwindling, other legal experts who are helping run class actions against the insurance industry are more hopeful.

John Berrill’s firm is running one such class action in coordination with Gordon Legal.

He said the real ramifications of the latest legal decision would be deliberated “for months”.

“A significant proportion of business-interruption [claims from] clients are still viable and can go forward,” he said.

Mr Berrill said it was difficult to quantify exactly how many businesses had viable policies because many were yet to lodge claims.

Mr Berrill’s firm is working with 30 claimants who want to keep fighting through a class action, including Ms Jones and her partner.

Ms Jones said their West Australian gyms would be taken over by their manager in that state, and they were trying to find new owners for their Victorian gyms. If they cannot find new owners, the doors will be closed.

Ms Jones wants to keep fighting for an insurance payout because it will help save their personal losses.

“There’s a lot of stress in this for us because effectively all the debt just transfers to us,” she said.

“It’s not over.”

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