In September 2019 Petra paid for an overseas holiday with her credit card, intending to travel in April and May 2020. In October, six months before departure, Petra became eligible for the complimentary travel insurance cover that came with her credit card. In December 2019, Petra discovered she was pregnant, but was happy to continue with her trip.
In March 2020 the Covid-19 pandemic was announced by the World Health Organisation. Petra became concerned about travelling while pregnant and asked her doctor what she should do. Petra also has an autoimmune disease that does not usually cause her any problems.
The doctor advised that, given her pre-existing medical condition, pregnancy and Covid-19, it would be unwise to travel and Petra cancelled her trip.
Petra submitted an insurance claim. The insurer declined Petra’s claim, referring to exclusion clauses within the policy, for pre-existing medical conditions, pregnancy and government interference, as a result of Covid-19 travel restrictions, with travel plans.
Petra did not accept the insurer’s decision and complained to FSCL.
Dispute
Petra said it was not one factor alone that caused her to cancel the trip, but a combination of Covid-19, pregnancy and her underlying health condition.
Since lodging the claim, Petra said countries had closed their borders, and even if she wanted to travel, she would not be able to. Petra felt that in these unprecedented times it would be reasonable for the insurer to accept her claim.
The insurer replied that its position was unchanged and referred to exclusions within the policy for:
- pregnancy
- a pre-existing medical condition
- Government interference with travel plans.
Review
We explained to Petra that the policy allowed the insurer to decline any claim arising directly or indirectly from pregnancy. By using the phrase ‘directly or indirectly’ even if pregnancy is only part of the reason for not travelling, the insurer may decline the claim. The same reasoning applied to Petra’s pre-existing medical condition.
We then turned our minds to the insurer’s reference to an exclusion for loss relating directly or indirectly to government interference. Petra’s ultimate destination had not closed its borders to foreign travellers, but Petra needed to transit through the United States. Although the United States would have accepted Petra because she was travelling from New Zealand, the United States had closed its borders to Petra’s ultimate destination. We were not sure whether the United States would have allowed Petra to transit through to return home.
If the insurer had been declining Petra’s claim on the government interference clause alone, we would have had to make more thorough enquiries about her ability to return to New Zealand. If the United States would not have allowed Petra to transit through, we would have said that the government interference with travel plans exclusion clause applied, allowing the insurer to decline the claim.
However, as the other two exclusion clauses applied, it was not necessary for us to make a finding on this point.
Resolution
We told Petra that we thought the insurer was entitled to decline her claim. Petra was disappointed but agreed to discontinue her complaint.
Insights for consumers
The doctrine of proximate cause recognises there may be more than one reason behind a decision to cancel a trip. Generally, we will look for the main, or dominant, cause. However, the phrase ‘directly or indirectly’ allows an insurer to look wider than the immediate cause and consider other causes. In this case, pregnancy and a pre-existing medical condition were part of the reason for Petra’s decision to cancel her trip allowing the insurer to decline the claim.
