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Can a scam be covered by insurance?

Travellers to Thailand beware 

Marcia and Sherlock were on holiday in Thailand.  During their stay in Bangkok Marcia and Sherlock were directed by a local guide to a travel agency, Super Tours Thailand (Super Tours), supposedly a government approved agency specialising in local tours and travel.  Marcia and Sherlock decided to book a holiday including flights and accommodation and paid Super Tours for all the travel costs in cash. 

Marcia and Sherlock then had some doubts about the authenticity of the bookings just made and on searching the internet discovered blogs about Super Tours suggesting it was a fraudulent organisation. Marcia and Sherlock contacted another travel agency who told them they had paid three times the true cost of the travel bookings made and some of the bookings did not look legitimate.  With the help of the New Zealand Embassy and the local travel police Marcia and Sherlock returned to Super Tours and managed to obtain a refund of part of their money.  Marcia and Sherlock were able to use the flight bookings made by Super Tours but chose not to proceed with the other arrangements because of their concern the bookings would prove to be false.  They remained out of pocket by more than $900.  


The claim 

Marcia and Sherlock claimed for their loss under their travel insurance policy with All Travel Cover on the basis that they were victims of a scam which was an unexpected event outside their control.  All Travel Cover declined the claim because it did not consider the circumstances of the loss were covered by the terms and conditions of the policy. 


All Travel Cover’s position 

The travel policy covers cancellation fees and lost deposits when a journey has been shortened or cancelled which cannot be recovered in any other way.  All Travel Cover said that cancellation fees and lost deposits are fees levied by travel providers to cover unrecoverable costs or lost business resulting from cancelled arrangements.  

In this case All Travel Cover said Marcia and Sherlock did not incur cancellation fees or lost deposits.  In fact the booking arrangements did not exist.  As the booking did not exist, it followed that the arrangements could not be cancelled or shortened so the claim did not meet the policy requirements. 


FSCL’s view 

The actual cause of Marcia and Sherlock’s loss was their understandable decision not to proceed with the arrangements made because they had discovered Super Tours was a scam company.  However, the policy wording was clear and we agreed with All Travel Cover’s position that to incur a cancellation fee or a lost deposit for a cancelled or shortened journey, there had to be a journey in existence.  All Travel Cover’s policy did not provide cover for scams or fraud of the type Marcia and Sherlock had experienced.  

We recommended that the complaint be withdrawn and discontinued the investigation.