Some time ago, Tanya and her husband Steve had been told by their doctors that unfortunately, Tanya would be unable to conceive naturally. In 2016, Tanya and Steve booked a holiday to Africa and bought travel insurance.
Soon after, Tanya found out she was pregnant. Tanya and Steve were overjoyed with the unexpected pregnancy. However, due to being pregnant, Tanya was unable to have the required travel vaccinations, and Zika virus also presented a risk. Upon their doctor’s advice, Tanya and Steve cancelled their trip, and submitted a claim to their travel insurer for their cancellation costs of $8,850.
The insurer declines the claim
Tanya and Steve’s insurer declined the claim on the basis of an exclusion clause in its policy that said “We will not pay for the following losses: pregnancy or childbirth” (the pregnancy exclusion).
Over the next few months, Tanya disputed the insurer’s decision to decline the claim. Specifically, Tanya argued that the exclusion clause did not exclude cover because their claim was not for pregnancy or childbirth. The claim was for cancellation costs that happened to arise as a result of Tanya’s pregnancy.
After several letters between Tanya and the insurer, the insurer agreed with Tanya that the pregnancy exclusion did not apply to exclude cover for the claim.
However, the insurer said that, regardless of the pregnancy exclusion not excluding the claim, there remained no cover under the policy because the requirements of the ‘insuring clause’ (the clause that provides cover), had not been met. The insuring clause said there was cover for losses arising from ‘unforeseen or unforeseeable’ events or circumstances.
Although the insurer agreed that subjectively, Tanya’s pregnancy was ‘unforeseen’ by her, it said that Tanya’s pregnancy was not objectively ‘unforeseeable’. The insurer said because Tanya had not had a hysterectomy, or her ovaries removed, and was in a relationship with a male, it was not absolutely and objectively unforeseeable that she could get pregnant.
The insurer also said that Tanya and Steve’s claim was not payable because of an exclusion clause excluding claims where people change their travel plans or decide not to continue with their trip (the ‘change of mind’ exclusion).
Tanya complains to FSCL
Tanya complained to FSCL. Tanya argued the policy should be read as her pregnancy being either subjectively ‘unforeseen’ by her, or, objectively and literally ‘unforeseeable’. Tanya disagree that both the subjective ‘unforeseen’ and the objective ‘unforeseeable’ had to be satisfied.
In any event, Tanya argued her pregnancy was both subjectively unforeseen by her, and objectively unforeseeable. Moreover, Tanya highlighted that the insurer had written in its letters to her both that her pregnancy was unforeseen and that her pregnancy was unforeseeable.
Tanya also said the ‘change of mind’ exclusion did not apply to exclude her claim, because upon discovering she was pregnant, Tanya was advised by her GP that proceeding with the trip would be irresponsible due to risk of contracting viruses she could not receive vaccinations for. Tanya and Steve had no choice but to cancel their trip – they did not change their mind about taking the trip, and they had no disinclination to travel.
Service issues
Tanya also complained about the service she received from the insurer in its management of her claim. Tanya said that by originally declining her claim under the pregnancy exclusion, and then reviewing the claim and saying the insuring clause was not satisfied, and relying on the ‘change of mind’ exclusion, the insurer had pre-judged the decision to refuse the claim. Tanya said her insurer was prepared to change the basis of its reasoning ‘every step of the way’ even if it meant contradicting its previous position.
Tanya and Steve wanted to try and resolve the complaint with their insurer amicably and quickly – their financial situation was soon going to change significantly by going down to one income. With their baby due soon, they wanted to know whether their claim was going to be paid.
Review
After reviewing Tanya’s further arguments, the insurer decided to pay Tanya and Steve’s claim. The insurer said it accepted Tanya and Steve’s claim met the requirements of the insuring clause. It also apologised for the offence it caused in the handling of their claim.
Tanya and Steve were very relieved with the outcome, and the complaint was resolved.
Our insight
This complaint was resolved within 10 working days of Tanya first contacting FSCL – showing the benefits of early resolution of a complaint.
It is not uncommon for us to see in our investigations that insurers move straight to relying on an exclusion clause to decline a claim, before analysing whether the circumstances of the claim mean that the insuring clause has been met.
Although an insurer is entitled to re-assess its reasons to decline a claim during both its internal complaints process, and once the complaint is with FSCL, complainants often say that they consider the insurer to be acting disingenuously in taking this action.
We encourage insurers to ensure a full analysis of whether the insuring clause is met is carried out, before moving to rely on exclusions, from the very first claim assessment.
