Maree was in Malaysia in March 2020 when the government announced it was closing its borders in two days’ time in response to the Covid-19 pandemic.
Maree had been booked to fly home to New Zealand a few days later, and assumed the pending border closure would prevent her from leaving on that flight. She raced to the airport and purchased an earlier flight home, leaving Malaysia shortly before the borders closed.
As it turned out, Maree’s original flight ended up being cancelled due to customer demand for flights plummeting. The airline did not offer a refund for the cancelled flight.
Maree made a claim to her travel insurer for the cost of her replacement flight, but the insurer declined her claim. Maree complained to FSCL.
Maree’s travel insurance policy did not have a specific pandemic exclusion clause. The insurer had relied on another clause that excluded any loss arising directly or indirectly from any interference with a person’s travel plans by a government. The insurer said that the Malaysian government’s border closure had indirectly interfered with Maree’s travel plans by causing her to change those plans. The insurer also said that the border closure caused a drop in demand for flights, which led airlines to cancel flights.
The insurer had also relied on a clause excluding claims for ‘any change of plans or disinclination to travel’, saying that it had been Maree’s decision to return to New Zealand earlier than planned.
Maree disagreed with the insurer’s view. Due to the escalating Covid-19 outbreak, she had feared for her health if she was unable to get home before Malaysia closed its borders. She had also been worried about travel disruption due to the Malaysian government’s announcement.
We reviewed the wording of both exclusion clauses, and applied normal legal principles of contractual interpretation.
In our view, the insurer had misapplied the government interference exclusion clause. For the insurer to rely on that exclusion, there would have to have been some action by a government that directly interfered with Maree’s travel plans.
In Maree’s case, the Malaysian government’s decision to close its borders would not have stopped Maree from getting home, as she was a New Zealander who was free to leave Malaysia. There was no actual interference with Maree’s travel plans by the Malaysian government. Maree thought there might be – but her mistaken belief was not enough to fit within the specific wording of the exclusion clause.
If Maree had not flown home early, the flight cancellation would have interfered with her travel plans. But the flight cancellation was not an action by a government, even if the border closure was ultimately what had led to the airline’s commercial decision to cancel the flight.
We also disagreed with the way the insurer had applied the ‘change of plans or disinclination to travel’ exclusion. Because of the specific wording of the clause, the reason for the change of plans or disinclination to travel was relevant. In legal terms, the insurer needed to consider what was the ‘dominant’ or ‘proximate’ cause of Maree’s change of plans. We felt that Maree’s change of plan was not a proximate cause in its own right, but was a consequence of the increasing risk of Covid-19 and the resulting travel disruption.
We recommended that the insurer reverse its decision and accept Maree’s claim. The insurer took some time to consider the interpretation of its exclusion clauses, but ultimately accepted FSCL’s approach, and paid out Maree’s claim.
Insights for participants
If a travel insurance policy does not contain a specific pandemic exclusion clause, it is incumbent on the insurer to carefully consider the wording of any alternative exclusion clause to assess whether it applies to a particular situation. It is for the insurer to prove that an exclusion clause applies.