Beauty salons to jewellers taking on insurance giants QBE and Lloyds in COVID class actions

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Small business owners who have been denied insurance payouts for COVID losses are taking their fight to the next level by joining class action lawsuits against several industry giants.

Two class actions are being lodged against Australian insurance company QBE and global insurance market Lloyds.

The two class actions by Gordon Legal will be the first in Australia around COVID pandemic payouts.

Melbourne beauty salon owners Boyan and Yana Ristovski have signed up to the larger class action against QBE.

“We wanted to join the class action because we lost so much money,” Ms Ristovski said.

“If the insurance industry had given us support, then we would have felt protected. When they gave us nothing, we felt so unprotected.”

Their small business was devastated by Melbourne’s extended lockdown last year. Mr Ristovski said it lost an estimated $100,000 while its doors were forced shut by state lockdowns.

When the pandemic hit, Mr Ristovski said they had business insurance with QBE providing for losses in the event of an outbreak of an infectious disease near their premises.

However, they have been unable to get a payout for losses during COVID.

“It’s been terrible,” Mr Ristovski said.

“At the time, we had just taken out a $500,000 mortgage on a home. You could see the stress this put on our family.”

Without a payout, he said they have kept their business afloat by spending almost all of their $150,000 in personal savings.

“As a class action, we are stronger,” he said.

“I’m hoping something good comes out of it but it will be a long road.”

QBE declined to comment.

Why aren’t insurers paying out claims?

Many Australian businesses had a type of insurance when the pandemic hit that could cover them for losses linked to an interruption to trade.

It is estimated there were roughly 250,000 policies of this ilk in Australia when the pandemic struck with a total potential liability of $10 billion.

However, the insurance industry has consistently claimed during COVID that these policies were never designed to cover business losses due to pandemics.

Last year its lobby group, the Insurance Council of Australia, took a test case to court to clarify that its members’ policies did not cover pandemics.

But it lost the case, in a surprise judgement that came down to just a few technical words.

A second test case has been lodged on other technical issues and is set to be heard later this year.

In the interim, the class actions are being lodged by Gordon Legal.

Its litigation lawyer Andrew Grech said they have filed proceedings against QBE in the Federal Court on Thursday.

Their class action so far only has about 150 businesses signed up. Mr Grech is hoping more will join now the action is lodged.

He said they understand there are roughly 25,000 policy holders with QBE that fit the brief.

“We don’t know how many would have losses impacted by COVID but we expect it to be many hundreds of thousands and many millions of losses.

“These are mum and dad businesses. They’ve suffered through COVID-19. It’s really unfair.”

What about this second class action?

The second class action is smaller and is against international insurance market Lloyds.

It is also being handled by Gordon Legal, and Mr Grech said they had also filed the proceedings against Lloyds in the Federal Court on Thursday.

He said only a handful are signed up to that class action and there was likely only around 100 policy owners in Australia covered by Lloyd’s specialist policy.

“They are policies with very large cover limits for business that have been very effected,” Mr Grech said.

Australian jewellery chain owner Damien Cody is one of the policy holders who has signed up to the class action against Lloyds.

“We’re determined to take them on,” Mr Cody said.

Mr Cody’s opal stores in Sydney and Melbourne have been devastated by COVID, because their main market before the pandemic was international tourists visiting Australia.

“Maybe the insurers were not expecting a worldwide pandemic. But nonetheless we’ve been paying a lot of money for many years taking out business interruption insurance and the pandemic did hit.

“It’s hit my company and many others like mine very hard.  We’ve lost 98 per cent of our revenue. We’re relying on a dribble of revenue via internet sales.

“It’s been horribly exhausting. We’ve had 20 staff we had to stand down. They’re people who had been with us many years.

“It’s certainly made me feel determined to see justice prevail.”

Lloyds of London has been contacted for comment.

Is a lengthy class action worth it?

The two class actions could take years to be resolved and it is anybody’s bet which way they will go.

“We are ready for it. We’ve endured the losses already,” Mr Cody said.

“We’re facing lengthy, expensive, protracted battles to get what is legally ours.”

Gordon Legal’s Andrew Grech told the ABC that it hasn’t been able to formally serve QBE or Lloyds with hard copy documents for the class actions because their offices are closed during the COVID lockdown in Sydney.

However, he said both insurers had been emailed documents on Thursday and they were awaiting a response.

In a statement, the Insurance Council of Australia said it wasn’t aware of the class actions.

“The ICA is not aware of any class actions that may have been commenced against QBE and Lloyds and has not seen any court documents that may have been recently filed,” a spokesperson said.

“So we cannot comment on the specific policy issues that are raised in any such proceedings.

“Policyholders who seek to resolve a claim through a class action will also have to pay substantial fees to litigation funders and lawyers.

“Whereas AFCA can make binding decisions on claims up to $1.085 million free of charge for policyholders.”

By business reporter Emilia Terzon (Original ABC Article)