Lost deposits lost in translation of the policy

In October 2019, Petra booked a cruise of South America for her and her husband in April 2020.

Unfortunately, in February 2020, Petra suffered a heart attack. Petra’s doctor advised her not to go on the trip, and Petra then cancelled the trip.

Petra made a claim to her travel insurer for $40,000, being the cost of the cruise and return flights for her and her husband. The insurer accepted Petra’s claim, but only paid $30,000 to Petra, because that was the limit outlined in the policy for lost travel deposits.

Petra complained to FSCL because she thought the insurer should pay the rest of her claim.

 

Dispute

Petra thought the limit for lost travel deposits shouldn’t apply to her claim, because she had paid for the cruise and flights in full. Petra said the ordinary meaning of ‘deposit’ was a part payment to secure a product or service, which was not what she was claiming for.

Petra was also unhappy with the insurer’s complaints process, which took 4 months to conclude.

The insurer said the limit for lost travel deposits clearly applied to the policy section under which Petra was claiming. That clause read:

 

Loss of Deposits

If your journey is unable to be completed because of any unforeseen circumstance outside of your control, we will pay or reimburse you the non-refundable travel costs prepaid in advance up to the maximum amount specified in the summary of benefits table.

The summary of benefits table specified $15,000 per insured for claims under the ‘loss of deposits’ clause.

 

Review

We reviewed the policy wording and agreed with the insurer’s view and decision to decline Petra’s claim.

While the word ‘deposit’ might ordinarily mean a part payment to secure a good or service, prepaid travel costs, whether paid in full or by deposit, are commonly described as ‘deposits’ in travel insurance policies.

We agreed with the insurer that the limit specified in the summary of benefits table clearly applied to all claims under the ‘loss of deposits’ clause, regardless of whether the travel costs had been paid in full or by deposit. The ‘loss of deposits’ clause was clearly intended to cover all non-refundable travel costs up to the limit specified in the table.

However, we agreed with Petra that there had been unreasonable delays with the insurer’s complaints process, which would have caused her some inconvenience.

 

Resolution

We issued a preliminary decision recommending the insurer pay Petra $250 in compensation for the inconvenience caused by their delayed complaints process.

The insurer and Petra accepted our preliminary decision, and the complaint was resolved.

 

Insights for consumers

It’s common for insurers to limit the amount they will pay for different claims under the policy. For example, insurers often limit the amount they will pay for pre-booked travel costs, lost baggage and medical expenses. Sometimes there are options for consumers to purchase added protection under the policy where required.

 

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