John and Jacqui booked a round the world cruise beginning and ending in Auckland. A week in to the cruise, Jacqui fell seriously ill and was diagnosed with chronic obstructive pulmonary disorder. She had to leave the cruise ship at the next port in Egypt and spend a few days in hospital.
After her discharge from hospital, Jacqui was advised not to re-join the cruise as the cruise ship did not have the facilities to help Jacqui recover from her illness properly. John and Jacqui had to cancel the remainder of their cruise and journey back to New Zealand. John and Jacqui contacted their travel insurer, High Seas, to claim for their flights home ($9,000) and for the fare they had paid for the cancelled part of their cruise ($58,000).
High Seas paid John and Jacqui $58,000 for the cancelled part of the cruise, but declined John and Jacqui’s claim for their flights home.
Both costs were covered under the policy wording; however, High Seas argued that it was not liable to pay for both costs. There was a condition in the policy wording which stated that if an insured person claimed for both cancellation costs and additional costs “for the same or similar services”, then High Seas would be liable to pay for the higher of those costs, but not both of those costs.
High Seas’ position
High Seas argued that its policy wording was meant to stop travellers from being paid twice by their insurance company for the same cancelled service and receiving a windfall. If an insured person has return flights from Auckland to Sydney, and the return flight is cancelled, that person could not claim for both the cost of the cancelled flight they originally paid, as well as the cost of the new flight booking. If High Seas paid both costs, John and Jacqui would be in a better position than if they had not gone on their trip.
John and Jacqui’s position
John and Jacqui argued that the limit in the policy wording did not apply because a one-way flight and an all-inclusive luxury cruise are not “the same or similar services”. The cruise was a self-contained holiday: it included transport, accommodation, food, entertainment, and more. While a flight can also provide these services, the dominant purpose of the flight is transport – to get John and Jacqui from A to B.
John and Jacqui complained to FSCL.
FSCL’s view and resolution
FSCL’s view was that both High Seas and John and Jacqui’s arguments were strong. FSCL agreed that a luxury cruise and a flight were very different services, but also agreed that if John and Jacqui were paid the full $9,000 for their return flight to New Zealand, they would be recovering twice on transport costs which had already been reimbursed as part of High Seas’ $58,000 refund to John and Jacqui.
FSCL’s case manager investigated the itemised cost of the cruise to determine how much of the cruise fare was apportioned, on average, for transport, accommodation, food, et cetera. Unfortunately the cruise liner would not release that information to FSCL.
FSCL negotiated a settlement agreement between High Seas and John and Jacqui for half of the cost of the flights ($4,500).