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Determination
Case number | 12-00-1078986 |
Financial firm | Lloyd's Australia Limited |
Case number: 12-00-1078986 16 August 2024
The complainant lodged a claim with the financial firm (insurer) under her travel insurance policy. Her travel agent (HM) cancelled the entire prepaid tour because the shipping line cancelled the Mediterranean, Middle Eastern and African cruise (highlight of the tour), due to the situation in the Red Sea and Suez Canal.
The insurer denied the claim on the basis it will not pay a claim for cancellation, delays or rescheduling by a shipping line. The policy excludes cover for a claim arising from an act or threat of terrorism and/or any act of war.
The complainant disputes the insurer’s claim denial. She expects the insurer to accept the claim.
Yes. The complainant has established a claimable loss for cancellation costs. HM’s cancellation of her prepaid tour was unexpected, unintended, and outside of her control.
The policy however excludes cover for a claim arising from an act or threat of terrorism and any act of war, whether war is declared or not, or from any rebellion, revolution, insurrection or taking of power by the military. The situation in the Red Sea and Suez Canal, which caused the cruise and subsequently the entire tour to be cancelled, falls within these policy exclusions.
The outcome is fair because the complainant’s circumstances were not covered under the policy. It would be unfair to expect the insurer to cover claims outside the agreed policy terms.
This determination is in favour of the insurer.
The insurer is entitled to deny the claim. It is not required to take any further action.
Yes. The complainant has established a claimable loss for cancellation costs. HM’s cancellation of her prepaid tour was unexpected, unintended, and outside of her control.
The policy however excludes cover for a claim arising from an act or threat of terrorism and any act of war, whether war is declared or not, or from any rebellion, revolution, insurrection or taking of power by the military. The situation in the Red Sea and Suez Canal, which caused the cruise and subsequently the entire tour to be cancelled, falls within these policy exclusions.
When making a claim, an insured party has the onus of establishing she suffered a loss for which her insurance policy provides cover. The insured party must establish this on the balance of probabilities (i.e. that it is more likely than not).
If a claimable loss is established, the insurer has the onus of establishing, on the balance of probabilities, the application of any exclusion it relies on to reduce its liability.
The complainant purchased the travel insurance policy on 26 April 2023 for the travel period from 28 March 2024 to 3 May 2024. She received a copy of the policy documents.
The complainant says that it is unfair to expect one to read over 60 pages of the policy documents. The responsibility however remained with the complainant to read the terms of the policy and assess if they met her needs.
She says that she would not have purchased the subject policy if the exclusions were highlighted on the front page. I accept that it is not feasible for the insurer to highlight the applicable exclusions in the front sections of the policy. This is because different policy terms may apply to the insureds, based on their individual claim circumstances.
The insurer is therefore entitled to rely on the policy terms and conditions in assessing the claim.
The policy covers cancellation costs if the complainant’s journey is cancelled at any time, and through circumstances that the complainant did not expect or intend or outside of her control.
The complainant has established a claimable loss for cancellation costs. I am satisfied that HM’s prepaid tour cancellation was unexpected, unintended and was outside the complainant’s control.
Once the complainant established a claimable loss under the policy, the onus shifts to the insurer to show an exclusion applies to defeat the claim.
The insurer states the following exclusions apply:
We will not pay …. k) An act or threat of terrorism.
Your claim Arises from any act of war, whether war is declared or not or from any rebellion, revolution, insurrection or taking of power by the military.
The complainant’s claim lodgement states:
The trip was cancelled by our tour provider due to unrest in the Red Sea/Suez Canal…Our trip has been cancelled by the travel provider “HM” due to the war going on in the Red Sea & Suez Canal.
HM cancelled the prepaid tour and its letter dated 30 January 2024 states:
The cruise portion of the package was cancelled by …cruises on the 16th of January due to the current situation in the Red Sea.
The complainant says:
I accept HM’s correspondence advised that the complainant would be able to claim the cancellation costs from her travel insurer. The insurer confirms it had no association with HM. The insurer is therefore not obliged to accept the claim based on HM’s advice to the complainant about policy coverage.
I acknowledge the shipping line did not cancel the part of the tour that led to the cancellation costs the complainant claimed. HM cancelled the remaining components of the tour after the shipping line cancelled the main component of the tour, the cruise.
The shipping line cancelled the cruise considering the risks of sailing in the Red Sea due to the ongoing attacks on ships. The insurer refers to news articles which say the ships including cruise ships were at risk of being attacked in the Red Sea.
The complainant does not dispute the cruise cancellation falls within the policy exclusions. This is because both parties accept the situation in the Red Sea constitutes to war/terrorism. She does not agree these exclusions should apply to HM’s cancellation of the remaining portion of her tour, as HM did not cancel this part due to terrorism or war.
The proximate cause of the loss is the dominant or effective or operative cause of the loss whether or not that be the last in time or the sole cause. In the complainant’s case, the proximate cause of HM’s tour cancellation was the shipping line’s cancellation of the cruise. If the shipping line did not cancel the cruise because of the situation in the Red Sea, the tour would have proceeded as planned.
Given the above, I am satisfied the insurer has established the policy exclusions about terrorism and war, on balance of probabilities, apply to the situation in the Red Sea and the complainant’s claim. This is because the prepaid tour was ultimately cancelled for this reason.
The insurer is therefore entitled to deny liability for the claim.
The outcome is fair because the complainant’s circumstances were not covered under the policy. It would be unfair to expect the insurer to cover claims outside the agreed policy terms.
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 the information the parties have provided.
While the parties have raised several issues in their submissions, we have restricted this determination to the issues that are relevant to the outcome.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
