Dennis and Karen booked a trip to the United States. They planned to hire a motorcycle, load it with their luggage, and travel where the wind took them, with Dennis driving and Karen riding pillion. When they booked their flights and bought travel insurance through their travel agent, they told the agent about their plans. who commented that it was something she would love to do.
A week into Dennis and Karen’s trip, the motorcycle skidded on a slippery road and rolled. Karen suffered various injuries including a broken collarbone, for which she had to have surgery. The total cost of her treatment in the United States was around $130,000. Dennis and Karen submitted a claim under their travel insurance policy for the medical costs.
The insurer declined to pay on the basis there was an exclusion in the policy for motorcycles with an engine size of over 200cc. The motorcycle Dennis and Karen had hired was 1,700cc. The insurer checked with the travel agent, who said her normal practice is to mention the exclusion whenever anyone tells her they plan to ride a motorcycle.
Dennis and Karen said that Linda knew the purpose of their trip. They said there is no way such a trip, with two passengers and all their luggage, could be done on a 200cc motorcycle. They said that the agent did not tell them the insurance cover was limited to a motorcycle of no more than 200cc engine size. Dennis and Karen complained to FSCL.
We reviewed the evidence. We considered that the Consumer Guarantees Act may apply. The insurance policy Dennis and Karen had purchased was not fit for the purpose of their trip. They had made the purpose known to the travel agent, and there was no reason they should not have relied upon her expertise.
We thought it most likely that the travel agent had not mentioned the exclusion. Dennis and Karen were experienced motorcyclists, and we doubted that they would have purchased that particular policy had Linda mentioned the 200cc exclusion.
We discussed our review with the insurer. Following our discussion, the insurer overturned the declinature and settled Dennis and Karen’s claim.
Key insights for the participant
Where a person makes the purpose of their trip known to an insurer (or the insurer’s agent), and relies on the insurer’s expertise, the insurer must sell the person a policy that is fit for that particular purpose.