While travelling in Bali in 2017, Kurt injured his right little finger. Kurt sought medical advice and was told his finger was dislocated, and it was only a minor injury. However, upon returning to New Zealand, Kurt’s finger had not healed. Kurt had an x-ray which showed his finger was broken in half, and he needed surgery. Kurt was unable to work for 49 days.
Before his injury, Kurt had two self-employment income streams. The first was from his adviser business, and the second was in relation to a franchise business.
Kurt’s ACC claim
Kurt submitted a claim to the ACC and began receiving payments for 100% of his pre-injury adviser income (because of the type of ACC cover his adviser business had). There was no ACC cover in relation to Kurt’s work as a franchisee, because he had only started that work immediately prior to his injury.
Kurt’s travel insurance claim
Kurt submitted a claim to his travel insurer to cover the balance of his lost income. The policy said the insurer would pay for loss of the insured’s usual income up to $1,000 per week if they suffered an injury during travel. The policy did not provide cover for the first 30 days after returning to New Zealand, but thereafter would provide cover for up to 90 days.
There were exclusions to the policy saying there was no cover if:
a) the claim was for any injury covered by the Accident Compensation Act 2001 (the ACC Act), or
b) the insured could not work because of illness or disease, even if contracted through an injury.
The insurer’s view
The insurer declined Kurt’s claim under exclusion a) (the ACC exclusion). It said that because Kurt was receiving ACC payments, the policy excluded cover. The insurer also said the policy only provided cover if the ACC did not provide cover, and that it did not ‘top up’ cover provided by the ACC.
Kurt’s view
Kurt said the insurer had not applied the ACC exclusion correctly. He said the purpose of the ACC exclusion was to avoid insured persons receiving both ACC cover, and cover under the travel insurance policy. Kurt complained to FSCL.
Our review
We said the ACC exclusion did not exclude Kurt’s claim. This was because Kurt’s claim was not for his injury; he had not claimed any medical costs related to his injury since returning from New Zealand. Kurt’s claim was for loss of income. The insurer argued the ACC exclusion clause meant any losses arising from an injury covered by the ACC Act, were excluded. However, the exclusion clause did not say this.
We also noted the insurer’s policy specifically allowed for a ‘top up’ when it said:
“We will, however, pay the difference between what is payable under the other insurance policy, health or medical scheme or Act of Parliament or reciprocal health agreement or such other source, and what you would be otherwise entitled to recover under this policy.”
The insurer re-assesses Kurt’s claim
We asked the insurer to re-assess Kurt’s claim. The insurer had obtained no information about Kurt’s income, or medical evidence to prove he had been unable to work, because it had immediately declined the claim under the ACC exclusion clause. We also said the insurer should consider paying Kurt an amount for inconvenience caused by it incorrectly understanding and applying its policy, which left Kurt without the benefit of the loss of income cover. However, before considering the amount to pay for inconvenience, we needed to know how much cover the policy provided for Kurt’s loss of income.
The insurer sought information about Kurt’s income from his accountant. This showed that Kurt had only lost $770 of his pre-injury income. On this basis we suggested a payment of $230 for inconvenience would be appropriate (bringing the global compensation amount to $1,000). Both parties accepted our suggestion and the complaint was resolved.
Key insight
It’s important insurers understand and apply their policies correctly. This complaint also highlighted the importance of insurers conducting a full assessment of whether there is cover under an insuring clause, before moving to decline a claim under an exclusion clause.
