In 2019 Sonny booked an overseas trip for mid-2020, starting with a week-long tour of Guatemala. He also purchased travel insurance.
In March 2020, Guatemala closed its borders to foreigners and Sonny’s Guatemala tour was cancelled. Sonny cancelled the rest of his trip and made a claim to his insurer.
Sonny’s insurer declined his claim because his policy had an exclusion for loss arising from any interference with his travel plans by a government. The insurer said that Sonny’s trip was cancelled because the Guatemalan government closed the borders.
Sonny did not agree with his insurer’s decision and complained to FSCL.
Sonny’s insurance policy did not have a specific pandemic exclusion. Sonny thought it was unfair for his insurer to rely on the government interference exclusion because if it intended to exclude loss arising from a pandemic, it should have included a specific pandemic exclusion in the policy. He argued that his loss was caused by the pandemic, not government interference, because Guatemala closed its borders as a result of the pandemic. Therefore, the government interference exclusion could not apply, and since there was no pandemic exclusion, his claim should be accepted.
Sonny also thought the policy was misleading to a consumer who might think that, in the absence of a specific pandemic exclusion, they would have cover for any loss arising from a pandemic.
We agreed the insurer could decline Sonny’s claim under the government interference exclusion. Sonny’s travel plans were interfered with by the Guatemalan government’s decision to close its borders. In interpreting the exclusion clause, it does not matter why the Guatemalan government made that decision.
While there was no specific pandemic exclusion in Sonny’s policy, we thought the insurer was entitled to rely on the government interference exclusion in this case because the situation fitted squarely into the policy wording. We accepted the absence of a specific pandemic exclusion could be confusing, but as Covid-19 was not an issue when Sonny bought his policy, we didn’t think the absence of such an exclusion would have necessarily influenced Sonny’s policy choice.
The absence of a pandemic exclusion also benefitted consumers because, depending on the circumstances, other effects of the pandemic might have been covered. For example, if a traveller caught Covid-19 while on a trip and needed to return home.
We told Sonny the insurer had correctly declined his claim. While he did not receive the outcome he was looking for, we helped him understand why his claim could be declined under the government interference exclusion in these circumstances.
Insights for consumers
Even if there is no specific pandemic exclusion in your travel insurance policy, your claim for Covid-19-related travel disruption may not be covered – another exclusion clause may apply. It all depends on the wording of the policy and the particular facts of your claim.