While visiting Krakow, Poland, Patrick went into a bar on the main tourist street. There were plenty of other tourists in the bar and the atmosphere was convivial.
When it came time for Patrick to pay for his drinks, the waiter brought over a handheld EFTPOS machine and Patrick swiped his credit card and entered his PIN. The machine made a familiar beep and the waiter informed Patrick that the transaction had been declined. As the wording on the machine was in Polish, Patrick took the waiter’s word for this. He tried again, several times, using cards from two different banks, but each time the waiter told Patrick the payment had been declined. Finally, a payment went through, and Patrick finished his drink and went back to his hotel.
The next morning, Patrick checked his bank accounts and realised that he had been scammed. The sum of $8,000 was missing from his accounts. Patrick immediately notified his banks. He then returned to the bar and confronted the waiter, who denied any knowledge of the scam. Local police were unhelpful, although they did tell Patrick that this is a common scam.
Patrick was able to recover approximately $6,500 from his banks. Patrick submitted a claim to his travel insurer for the balance.
The insurer’s view
The insurer declined Patrick’s claim. The insurer said that there was no cover under the policy for loss in these circumstances: the cards were not stolen, or used without Patrick’s authority, and it was not a case where Patrick accidentally lost cash.
Patrick said that he acted as swiftly as possible to notify the bar, Polish police, and New Zealand banks of the fraudulent activity and that he took all possible steps to protect his card at all times. Patrick considered that this was a very obvious case of fraud and the insurer should compensate him. He complained to FSCL.
We reviewed Patrick’s travel insurance policy. We noted that the relationship between Patrick and the insurer was governed by the wording of the policy, which was the contract between the two parties. Although some policies do cover loss caused by fraud, this particular policy did not.
We considered that the insurer had reasonably applied the policy and was under no obligation to make good Patrick’s loss.
We discussed the wording of the policy with Patrick. As a result of our discussion, Patrick withdrew his complaint.
An insurer does not have to make good a loss caused by card fraud if the circumstances are not covered by any insuring clause in the policy.