In November 2019, Mahalia booked a trip to the Bahamas. Mahalia was scheduled to fly from New Zealand to Houston on 12 April 2020, and then onwards to Nassau (the capital of the Bahamas). The following day, Mahalia would fly from Nassau to Freeport, where she would stay for a week, before returning to New Zealand on 20 April 2020.
On 1 April 2020, Mahalia’s travel agent informed her that her flights between New Zealand, Houston and Nassau had been cancelled, but the airlines had issued her a refund. Mahalia lodged a claim with her travel insurer for the Freeport flights, which hadn’t been cancelled, but couldn’t be used since Mahalia couldn’t get to Nassau.
Mahalia’s insurer declined her claim due to an exclusion in her policy for claims arising from government interference. The insurer said New Zealand’s lockdown, which began on 25 March 2020 and continued throughout April 2020, would have interfered with her trip.
Mahalia complained to FSCL because she thought the government interference exclusion shouldn’t apply to her claim.
Mahalia said the laws in place in New Zealand on 1 April 2020, that were enforcing New Zealand’s lockdown, had been determined as ‘unlawful but justified’ by the courts following the ‘Borrowdale case’ about the legality of New Zealand’s lockdown. Mahalia argued that since the government restrictions stopping her from travelling were technically unlawful at the time her trip was cancelled, there was no government interference with her trip.
Mahalia also thought it was unfair for the government interference exclusion to apply in the absence of a pandemic exclusion, since ultimately her trip was cancelled due to Covid-19.
When investigating Mahalia’s complaint, we found that the airline operating the New Zealand-Houston-Nassau flights had issued a press release on 16 March 2020 publicly announcing an 85% reduction in their international network due to reduced demand. In this announcement, the airline confirmed they would not be operating flights between New Zealand, Houston and Nassau in April 2020.
Although the airline didn’t formally cancel Mahalia’s flights until 1 April 2020, we thought the disruption to Mahalia’s trip actually arose when the airline issued their press release on 16 March 2020, at which time New Zealand’s lockdown hadn’t been announced.
We issued a preliminary decision upholding Mahalia’s complaint, because we thought the government interference exclusion shouldn’t apply to exclude her claim. In our view, Mahalia’s claim for the George Town flights arose from the airline cancelling her flights from New Zealand to Nassau due to reduced demand on 16 March 2020, not government interference with her trip.
The insurer disagreed with our preliminary decision. The insurer thought the formal cancellation date on 1 April 2020 should be observed as the official date Mahalia’s claim arose, at which time there were government restrictions interfering with Mahalia’s trip. The insurer said the media release announcing the cancellation shouldn’t be relied on because it was possible the airline would reverse their decision closer to April 2020, if circumstances had changed.
We disagreed with the insurer. The media release was clear and detailed about which flights were being suspended in April 2020. We thought it was unlikely the airline would reverse their decision, and, even if they did, it was unlikely that the situation would change for the better so they could expand their network again by April 2020.
We thought it was reasonable that the formal cancellation was slightly delayed, since the airline would have had thousands of passengers to contact. We thought it would be unfair for the outcome of Mahalia’s complaint to turn on the length of the airline’s delay, as it would come down to luck whether the airline notified Mahalia of the cancellation before or after any government interference arose.
We issued a final decision upholding Mahalia’s complaint.
Insights for consumers
Over the past year, due to the effects of the Covid-19 pandemic, governments around the world have implemented border and travel restrictions impacting people’s travel plans.
This has led to many people’s travel insurance claims being declined due to an exclusion from cover where there has been government interference with their trip, even if there is no pandemic exclusion in their policy. Mahalia’s complaint was one of the few we have investigated where we found there was no government interference with her trip at the time her claim arose, because her trip had already been disrupted by the airline’s reduced network due to falling customer demand..