In November 2019, Alice and Frank booked a cruise to the Maldives that was due to sail in April 2020. When they paid for their cruise, they also purchased travel insurance, including additional cover for a minor health condition.
In March 2020, despite the escalating impact of Covid-19 globally, the cruise company contacted Alice and Frank to advise that the cruise would depart as planned. The cruise company outlined the measures it intended to take to stop the spread of Covid-19 onboard.
Alice and Frank were becoming increasingly concerned about Covid-19, particularly given Alice’s heightened risk due to her health condition. On 9 March, Alice and Frank cancelled their trip. They incurred around $6,000 in cancellation fees and submitted a claim to their insurer.
The insurer declined the claim because the insurance policy contained an exclusion clause relating to an epidemic or pandemic. Alice and Frank disagreed with the decision and complained to FSCL.
Alice and Frank argued that the exclusion did not apply because the World Health Organization (WHO) never declared there was an epidemic, and they had cancelled the cruise before the WHO’s 11 March declaration that Covid-19 was a pandemic.
We reviewed the pandemic exclusion clause which clearly stated that there was no cover for any loss directly or indirectly caused by, or arising from, an epidemic or pandemic (including a likely epidemic/pandemic or the threat of one). The policy directed policy holders to the WHO’s website for further information about epidemics or pandemics.
We reviewed all the WHO’s public statements and found that the terms ‘epidemic’ and ‘pandemic’ were used as early as 24 February 2020. The definition of an epidemic is a high concentration of infections in a localised geographical area. A pandemic is the same as an epidemic but over multiple geographical areas. On 9 March, the day Alice and Frank cancelled their cruise, Covid-19 was present in more than 100 countries.
We advised Alice and Frank that the insurer had correctly declined their claim. While the WHO had not formally declared an epidemic at the time they cancelled their cruise, the insurer had sufficient evidence to show that Covid-19 was a likely epidemic or pandemic (as evidenced by the continued use of the term by the WHO from late February) or at the very least, the threat of one.
The decision to cancel the cruise was because of Alice’s increased risk if she caught Covid-19. The loss was directly caused by Covid-19, an epidemic/pandemic, and the exclusion clause applied.
Alice and Frank accepted our decision and discontinued their complaint.
Insights for consumers
If your insurance policy contains an epidemic/pandemic exclusion clause, any claim because of Covid-19 is likely to be declined.
Insurance policies contain exclusions to limit an insurer’s risk to an event (like a pandemic). As well as carefully reading your insurance policy before purchasing, it’s worth checking your policy before making a claim, to see if there are any exclusions which could apply.