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Determination
Case number | 12-00-1042084 |
Financial firm | Zurich Australian Insurance Limited |
Case number: 12-00-1042084 20 August 2024
The complainants had booked a Kimberley Coast cruise due to depart in July 2022.
The cruise operator cancelled the cruise and the complainants say the cause of the cancellation was a strike. The complainants made a claim on their travel insurance policy.
The insurer rejected the claim, saying the cruise was cancelled because of the transport provider’s insolvency and failure to deliver promised services, both of which it says are excluded under the terms of the policy.
Yes. The cruise was cancelled because of a strike, which is covered by the policy. The insurer has not shown any of the exclusions in the policy apply.
This determination is in favour of the complainants.
Within 14 days of acceptance of this determination, the insurer must pay:
Yes. The cruise was cancelled because of a strike, which is covered by the policy. The insurer has not shown any of the exclusions in the policy apply.
The complainants lodged a claim with their insurer for loss suffered when a cruise they had booked was cancelled. They say their cruise was cancelled because of a strike.
The insurer says the cruise was not cancelled because of a strike. It says the cause of the cancellation was the transport provider’s insolvency and failure to deliver promised services.
The complainants are required to show, on the balance of probabilities (that it is more likely than not), that they suffered a claimable loss under the policy. This means they must show the loss was caused by a risk for which they are insured.
Once the complainants prove the existence of a claimable loss, the insurer is liable for the loss unless it shows an exclusion or limiting condition applies. The insurer has the onus of proving on the balance of probabilities the application of the exclusion or condition.
The policy says:
We will not pay for claims caused by:
1. Transport Provider caused cancellations, delays or rescheduling other than when caused by strikes.
This means that the policy:
The policy excludes insolvency:
We will not pay for:
claims arising from the failure of any travel agent, tour operator, accommodation provider, airline or other carrier, car rental agency or any other travel or tourism services provider to provide services or accommodation due to their Insolvency or the Insolvency of any person, company or organisation they deal with.
‘Insolvency’ is defined in the policy as meaning:
bankruptcy, provisional liquidation, liquidation, insolvency, appointment of a receiver or administrator, entry into a scheme of arrangement, statutory protection, presentation of a petition for the compulsory winding up of, stopping the payment of debts or the happening of anything of a similar nature under the laws of any jurisdiction.
The complainants’ claim that the cause of the cruise cancellation was a strike is supported by:
today we received advice from our crewing managers that due to a dispute a new crew will not be provided for 3rd July.
The complainants say this shows that the crew had gone on strike and that the cruise operator was recruiting to replace them.
The insurer says:
AFCA interprets disputed terms in accordance with their plain and ordinary meaning. In doing so we will consider how a reasonable person would interpret the term. As the term ‘strike’ is not defined in the policy, we will consider how it is defined in a dictionary.
The definition of ‘strike’ in the Macquarie Dictionary is:
a concerted stopping of work or withdrawal of workers' services in order to compel an employer to accede to demands or in protest against terms or conditions imposed by an employer.
The essential elements of a strike, according to this definition, are:
The insurer has also provided definitions of ‘strike’ contained in public websites for Employment New Zealand, and the Australian Fair Work Ombudsman. See section 3.2 of the determination for these definitions
On balance, I am satisfied the complainants have established the cruise was cancelled because of a strike. The cruise operator’s email to the complainants shows:
I am satisfied on the balance of probabilities that amounts to a strike:
The insurer relies on the omission of any mention of strike in any liquidator reports to creditors. I am not persuaded by this argument because it was not essential that the strike be mentioned in these reports.
I also do not accept the insurer’s argument that the complainants should establish that requirements under Australian and New Zealand employment law governing strikes are met.
If the insurer wanted to define or change the definition of the term strike to add in the requirement that strikes be legal under Australian and New Zealand employment law, it had the opportunity to do so. However, it elected not to. It would be unfair to impose this requirement when it is not defined in the product disclosure statement, which is what the contract between the parties is based on.
As the loss was caused by an event the policy covers, the insurer has the onus of establishing one of the exclusions applies.
I am not satisfied that it has met this onus.
The policy excludes loss caused by insolvency.
The insurer says the cruise operator was insolvent from May 2022 onwards and the insolvency was a reason for the cancellation of the cruise on 2 July 2022.
The insurer relies on a Statutory Report by A Liquidator to Creditors (dated 13 January 2023) which says:
Based on my investigations, my best estimate is that the Company has been insolvent since at some point during the period from May 2022 to August 2022, when the vessel… was arrested by the Federal Court of Australia leading to the cessation of all the Company’s operations (emphasis added).
Based on this report, I accept it is likely the cruise operator became insolvent sometime between May and August 2022. However, there is insufficient information to conclude on the balance of probabilities that:
A Liquidators’ Initial Report to Creditors and Shareholders (dated 11 May 2023) says:
The Company traded for less than 12 months before it ran into financial difficulties. Attempts to recapitalise the business were unsuccessful and [the company] began cancelling cruises from July 2022.
The insurer relies on this report to say that the company was experiencing financial difficulties which subsequently led to the cancellation of the planned cruise and in turn led to the insolvency.
It is possible that the cruise operator’s financial difficulties led to difficulties paying the crew, and that led to the strike which in turn led to the insolvency. But there is insufficient information to establish this on the balance of probabilities. There is no persuasive evidence which shows financial difficulties caused the strike or the cancellation. Nor does the existence of financial difficulties meet the policy’s definition of insolvency.
The insurer has also not established it can rely on the Transport Provider’s failure to deliver promised services. This is because the policy covers Transport Provider caused cancellations that are caused by strikes.
Within 14 days of acceptance of this determination, the insurer must pay:
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. We have reviewed and considered all of the information the parties have provided.
While the parties have raised a number of issues in their submissions, we have restricted this determination to the issues that are relevant to the outcome.
‘Strike’ is defined in the Fair Work Ombudsman website as:
refusing to attend or perform work.
‘Strike’ is defined in the Employment New Zealand website as:
when a number of employees totally or partially:
• break their employment agreement
• stop work or don’t accept some or all the work they usually do
• reduce their normal output, performance, or rate of work.
Employees don’t have to stop work completely for them to be on strike.
