A costly meal
On 26 September 2014 Penny was in Barcelona. Penny was hungry and went to a local restaurant. After ordering, she sat down and put her hand bag on the table within reach.
Penny enjoyed her meal but after she had finished she realised that her handbag was gone.
Penny reported the theft to local authorities and called her insurer, Paramount Protection (“Paramount”).
After returning to New Zealand, Penny put in a claim for the policy limit of $250 NZD to compensate her for the loss of $750 NZD equivalent currency that was in her handbag.
Paramount declined Penny’s claim relying on the policy wording that said Paramount would not pay for stolen money if the cash, bank notes or cash were not on your person at the time they were stolen.
The complaint
Penny did not believe that it was clear the exclusion clause was limited to items that were either on her person or secured to her with a strap. Penny believed that having the item close enough to her where she could exert control would be reasonable. Penny reasoned this would be similar to keeping her items in her hotel room but not in the secure safe.
Paramount’s position
Paramount was of the view that the policy sets a higher standard for the safekeeping of cash, bank notes, currency notes or money or postal orders. This higher standard requires that for cover to exist, these items have to be on your person when a theft occurs, as opposed to a lesser standard of care for other goods such as cameras or luggage. Paramount believed the exclusion was clear when compared to other sections of the policy and as the money was not on Penny’s person, Paramount was not liable for Penny’s loss.
FSCL’s involvement
We investigated and found:
- While Penny had her hand bag with her, she did not have it on her person or otherwise secured to her.
- Giving the phrase ‘on your person’ its ordinary meaning, Penny did not satisfy the insuring clause.
- When contrasted with other sections of the policy, the insuring exclusion clause for cash, banknotes and currency was drafted differently. We accepted that this is because money should be secured even more carefully than other goods because currency is highly sought after and readily transferrable.
- Penny had the opportunity to read and understand the policy wording before her travel.
Outcome
We found that Paramount had correctly followed its policy in denying Penny’s claim. However, in our discussions with Penny and Paramount, we considered Penny had provided some level of security and asked Paramount to consider making an ex gratia offer to Penny in recognition of her loss. Paramount offered Penny $125, half the policy limit which Penny gratefully accepted.
Lesson
The wording of your insurance policy is carefully drafted to cover specific events and should be read carefully.
Phrases such as “report within 24 hours” or “on your person” will be given their ordinary meaning and read strictly by your insurer. You should comply with these phrases as closely as you can.
If you do not understand how a clause in your policy operates or what it means you should seek clarification from your insurer before travelling.
