Jamie and Rose were holidaying in Bali when they became aware of volcanic activity from Bali’s Mount Agung. They read news reports noting that people within 12 kilometres of the volcano had been evacuated as the alert status had changed from “ready to erupt” to “danger”.
Jamie and Rose were staying about 64 kilometres from the evacuation zone and were unaffected by the volcanic activity. The airport nearby was also unaffected.
However, Jamie and Rose decided it would be prudent to return home as there are only three flights to Bali a week. As Jamie and Rose were travelling on staff tickets they were concerned that should volcanic activity affect the nearby airport, they would not be given priority.
Upon their return, Jamie and Rose submitted a travel insurance claim for their accommodation costs that they had paid for but not used. The insurer declined their claim because it arose from Jamie’s and Rose’s personal choice (“disinclination to travel”) to return to New Zealand.
Jamie and Rose did not accept the insurer’s decision and referred their complaint to FSCL. In their view, they had to amend their travel arrangements because the volcanic activity was unforeseeable and beyond their control. Jamie and Rose believed their claim fell squarely within the loss contemplated by the insurance policy and should be met by the insurer.
We found that Jamie and Rose decided to cancel their travel and return to New Zealand without official direction, and without any event disrupting their travel. We agreed that the insurer was correct in declining Jamie and Rose’s claim under “disinclination to travel” for personal reasons, rather than circumstances beyond their control.
Further, the policy requires an insured to take reasonable steps to mitigate any loss. We noted that the couple did not contact their insurer to seek advice or official direction before cancelling their travel arrangements.
Jamie and Rose did not agree with our findings. They disagreed their decision was a “personal choice” but rather was due to media warnings. Had they stayed and been stranded, Jamie and Rose would have incurred far greater costs in breach of their obligations under their insurance contract to mitigate losses.
We did not agree. Jamie and Rose were staying in an area a substantial distance from the volcano which may or may not have erupted or affected their travel. As they acted pre-emptively, they suffered a loss in forgoing their booked accommodation. A reasonable step would have been to contact the insurer for their advice.
We issued our final recommendation upholding the insurer’s decision to decline Jamie and Rose’s claim for costs.
Key insights for the participant and the consumer
The insurance policy forms the contractual basis between parties. The risk that the insurer is willing to cover often differs from the risk the insured party expects they are covered for. The insured should read and understand their policy wording. In this case, Jamie and Rose should have contacted their insurer, or acted in accordance with official travel advice.