Fred and Caroline were due to fly to Australia on 24 October 2013. As Fred had paid for the flights with his credit card, he had cover under the travel insurance policy connected to the card.
On 4 October 2013, Fred had prostate surgery and was told by his surgeon that he would be fine to fly to Australia later that month on 24 October, as planned. Unfortunately, after the successful operation, Fred suffered from post-operative bleeding and his surgeon advised him not to fly. Fred and Caroline cancelled their trip and submitted a claim to their travel insurance company for the costs of the flights ($1,600).
The insurance company declines the claim
The insurance company declined Fred and Caroline’s claim on the basis of an exclusion clause in its policy which stated it would not pay for a pre-existing medical condition (“the exclusion clause”). The insurance company said that Fred’s prostate condition, which gave rise to the surgery, was pre-existing, and that the post-operative bleeding was a direct result of the surgery, meaning the exclusion clause applied. The insurance company also said that the ‘proximate cause’ of the cancellation was Fred’s pre-existing prostate condition.
Fred provided a letter from his surgeon which said that although Fred’s enlarged prostate was a pre-existing condition, it was actually the post-operative bleeding which meant he could not fly. Fred and Caroline argued that nobody could foresee that the post-operative bleeding would occur, and if it was not for the bleeding they would have been able to go on their holiday.
Review of the exclusion clause
We reviewed the insurance policy wording. We first looked at the exclusion clause. We noted that the clause stated: ‘We will not pay for a pre-existing medical condition’. As Fred and Caroline were claiming for cancellation costs, not for costs of treating the pre-existing medical condition itself, we said that the exclusion clause did not apply. We noted the exclusion clause may have applied if it was prefaced with: we will not pay for any claim ‘arising from’ or ‘caused by’ a pre-existing medical condition. However, the policy writers had not drafted the clause this way, and in the circumstances, the clause could not apply to exclude cover.
We also looked at the doctrine of proximate cause, which the insurance company had mentioned in its letters about the claim. In the context of the law of causation, causation is typically analysed on a ‘but for’ basis. That is, an event is the cause of another event, if ‘but for’ the first event, the second event would not have happened. This means there can be many ‘but for’ causes which contribute to any event.
However, in the context of insurance, for there to be cover under an insurance policy and to determine whether an exclusion clause applies, the cause that counts is not every ‘but for’ cause, but the proximate cause.
The proximate cause of an event is the dominant or efficient cause. Causes which do no more than set the scene, or events/causes which are simply an expected result of an event/cause which has gone before, are not the ‘proximate cause’.
We had already found that the exclusion clause did not apply, on the reasoning above. However, even if the clause had read that the insurance company would not pay for any claim ‘arising from’ or ‘caused by’ a pre-existing medical condition, the insurance company would still need to show that the cancellation of Fred and Caroline’s trip was proximately caused by Fred’s pre-existing prostate condition.
In our view, the cancellation was not caused by Fred’s pre-existing prostate condition. The pre-existing condition ‘set the scene’ that at some stage Fred may need surgery, but it was not clear when that may be. The surgery which did occur was a usual/expected result of Fred’s pre-existing condition.
However, the post-operative bleeding which Fred suffered was not a usual or expected result of the surgery, based on Fred’s surgeon’s medical evidence. This meant that the development of the post-operative bleeding was the proximate cause of the cancellation. The post-operative bleeding was not a pre-existing medical condition, and therefore, even if the policy wording said the insurance company would not pay for any claim arising from, or caused by a pre-existing medical condition, the exclusion clause would still not have applied.
There can be instances where insurance policy wording is so wide, for example, it says ‘any claim arising directly or indirectly from’, that the doctrine of proximate cause is ruled out. However this wording was not used in this policy, and we found that the exclusion clause could not apply. We issued a notice of recommendation that the complaint should be upheld. The insurance company accepted the notice of recommendation and paid the claim.
 Groves v AMP Fire & General Insurance Co (NZ) Ltd.  2 NZLR 408.