In his novel Oliver Twist, written in the 1830s, Charles Dickens got it right when he wrote: “The law is an ass—an idiot.” This famous observation seems appropriate when you consider what the Federal Court has ruled in the case of an appeal involving insurers, who didn’t want to pay out claims linked to the pandemic’s lockdowns that interrupted policyholders' businesses.

In a nutshell, hundreds of thousands of businesses could have business interruption insurance, which they took out thinking if something unusual happens, such as a fire, hurricane, flood, anti-terrorist operation, a crazy government decision or a pandemic closed down your business, you’ll be covered.

Anyone who’s seen ads for business interruption insurance will see that they start from the proposition that it’s wise to be covered for the unexpected but possible. And hundreds of thousands of careful business owners would’ve forked out tens to hundreds of thousands of dollars to make sure that they were covered if their businesses were trumped by a surprise negative event.

However, after the pandemic struck and governments forced businesses to lock down for good reasons, many policyholders thought their business interruption insurance would cover them. Why? Well, their business had been well and truly interrupted!

Enter the lawyers and their ability to read fine print in policies and they told insurers that these Coronavirus-created lockdowns were exceptions and they didn’t have to pay out.

But on Monday, as The Australian’s David Ross explained: “The full bench of the Federal Court denied six appeals that had sought to reverse an earlier decision that denied ­attempts by businesses to claim for pandemic losses. The decision opens the way for insurers to crack open war chests collected in the early days of the pandemic to cover potential losses arising from pandemic claims.”

This is good news for the likes of QBE, IAG and Suncorp who had put away dough for potential claims which now can be added to profits and will be great for their shareholders’ stock prices today!

Ross says over $1.5bn had been socked aside in case the courts said businesses should be covered for the shock and awe of the pandemic closure of businesses.

Not surprisingly, lawyers, who love to see a bit of bright light shining through black clouds, think some businesses with specific wordings in their policies could get compensation but these claims still could lead to costly disputes and appeals.

The ruling also threw out an earlier decision by Judge Jayne Jagot, who didn’t think JobKeeper payments to businesses should’ve reduced the size of their claim. She also thought interest paid coping with the business losses should be included in the claims against the insurers. But this was ruled out too.

The only option left for businesses is the High Court but only a business such as Star Entertainment might have the resources to take a gamble with another appeal.

The AFR says, “another bevy of cases is being run to test different interpretations of business interruption insurance. The Insurance Council said this included policy wordings on disease definition, COVID-19 outbreak proximity and the impact of government mandates on closures”.

So there is hope that some businesses might see compensation but the vast number of policyholders are set to get nought!

If the law is an ass, what is insurance?