Written by: Donna Kirk – Pro Leaders Academy Pty Ltd


We all know we must read the fine print – but when it comes down to it, we don’t. We skim. We can be forgiven for the assumptions we make based on knowledge, experience, and the situation.

But how does what we read come into being? Someone had to put that contract together and they are not always lawyers. Often its someone in the procurement or contracts department that are responsible for producing a contract. They may or may not have formal training. There may be times when a previous contract is used as a base and amended to suit the new requirement.

This happens a lot. Contracts with what many would consider ‘standard’ clauses and terms that are that are commonly used or generic to most contracts is where the danger lies when people generally skim over the details and neglect the impact that these clauses may have on them and their situation.  Skimming over contracts may be an easy way to quickly flick through to the spot where you need to sign, however titles of sections within the contract don’t always suggest the general information that applies to all individuals and their situations.  Without careful consideration of what each clause means to you and your situation, can be costly to rectify in the future

Contracts correctly executed are legally binding documents. We know this. However, as the insurance industry is discovering, accuracy or inaccuracy in this case can provide legal challenges.

Last year the industry’s lobby group, the Insurance Council of Australia and AFCA took a test case to the NSW Court of Appeal.

Businesses often have Business Interruption Insurance (BI) to provide compensation in the event their businesses suffer a loss and are not able to operate through no fault of their own. Then Covid hit. Many businesses considered themselves protected only to discover a clause in most insurance BI contracts that states their BI “do not cover revenue losses due to “diseases declared to be quarantinable under the Quarantine Act 1908 (Cth) and subsequent amendments”.

Straightforward – there is a clause that says under the Quarantine Act 1908 (Cth) and subsequent amendments you are not covered.

However, the insurance industry lost the case, with a unanimous ruling that hinged on just a few words – a few words that had not been updated and had been overlooked.

The Quarantine Act was repealed and replaced by another set of laws, the Biosecurity Act 2015 (Cth) in 2016.

COVID-19 was declared as a quarantinable disease under the Biosecurity Act in January 2020.  But it was never declared as such under the old act, because it was repealed years before COVID-19 arose as a pandemic.

However, the BI contract referred to the Quarantine Act 1908 (Cth) which had been repealed therefore no longer enforceable, and the subsequent clause is no longer valid. And this is what the judges pointed out in their ruling.

This will likely be litigated for a long time yet; however it is a very timely reminder to us all – Assumptions and vague, or inaccurate clauses combined can lead to unenforceable contracts and you don’t want to be on the wrong end of the situation.

Read the full case here:  https://www.caselaw.nsw.gov.au/decision/175d83c4c19face7f3e6bc2c

ABC News:: https://www.abc.net.au/news/2021-01-28/insurance-industry-facing-class-actions-covid-claims/13091872

NOTE: The content of this article is intended to provide a general guide to the subject matter, and specialist advice should be sought about your specific circumstances. The content must not be relied upon as legal, technical, financial or other professional advice.