When Mark was 16, he was diagnosed with a ‘leaky’ heart valve. Mark saw a cardiologist every six months or so for a check-up, but his condition was stable for many years and Mark did not need surgery or any other medical intervention.
That changed when Mark was 31. During a regular check-up, Mark’s cardiologist noted that his condition had unexpectedly worsened. The cardiologist recommended surgery.
Mark’s parents, James and Julie, had been about to depart for a trip to Europe. However, the cardiologist said that the surgery could not be delayed until they returned. So James and Julie cancelled their trip, and Mark had surgery to repair the valve. Happily, the surgery went well and Mark moved to his parents’ home to recuperate.
James and Julie claimed the costs of the cancelled trip (almost $18,000) from their travel insurer. However, the insurer declined their claim.
The insurer’s view
The insurer pointed out that the insurance was intended to provide cover for losses for ‘unforeseen or unforeseeable circumstances’. The insurer said it was foreseeable that Mark might need surgery one day.
The insurer also drew James and Julie’s attention to the specific wording of the policy. The policy excluded cover for existing medical conditions. For the people who are actually travelling, if they disclose certain existing medical conditions in advance, the insurer may agree to cover them for losses caused by the condition. For people who are not actually travelling, there is no such provision. There is simply no cover for existing medical conditions of people who are not actually travelling.
James complained to FSCL. James said the wording of the policy was ambiguous in more than one key area.
James said that because Mark’s condition had been stable for 15 years, James and Julie did not reasonably expect, or ‘foresee’, that Mark would suddenly need urgent surgery that might force them to cancel their trip. It was an ‘unforeseen circumstance’.
James also pointed out that he and Julie were not trying to recover the costs of the treatment (surgery) that was needed for Mark’s existing medical condition, which is what the policy seemed to prohibit. The loss they had suffered was the cost that they themselves had incurred in cancelling their trip.
We reviewed the travel insurance policy.
We considered that James and Julie could not reasonably have foreseen Mark’s sudden need for surgery after 15 years of medical stability. We considered that the cause of their loss was an unforeseen circumstance.
We noted that the policy excluded ‘the following losses: death, illness or injury’ related to an existing medical condition. James and Julie’s loss was not death, illness or injury; it was travel cancellation costs, something we considered that the policy did not clearly exclude.
The policy also said James and Julie could not be insured for ‘the existing medical condition/s of someone who is not travelling with you’. Again, we noted that James and Julie were not seeking cover for Mark’s medical condition/treatment. They were seeking cover for their cancellation costs.
Even though the cancellation costs were incurred as a result of Mark requiring surgery for an existing condition, we agreed with James that the wording of the policy was ambiguous and unclear. If the wording of an exclusion in an insurance policy is ambiguous, it must be interpreted in favour of the person who did not draft the policy, namely the insured. We wrote to the insurer, pointing out the ambiguities, and asking that it reconsider its decision in light of our letter.
The insurer said that its policy had never been intended to cover a situation such as this. However, it recognised that the wording of the policy was ambiguous and did not fully reflect its intentions. It reconsidered its decision and decided to accept James and Julie’s claim after all. The complaint was settled.
When an insurer drafts an insurance policy, it must be very clear in the wording of the policy about what is excluded from cover. If the wording is unclear or ambiguous, the ambiguity will be resolved in favour of the party who did not draft the policy (the insured).