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Unexpected tragedy

Sandra and Paul had been planning a river cruise holiday in Australia with friends since May. In October Paul’s father died unexpectedly, deeply affecting Paul’s brother James. The following May, Sandra and Paul left for their trip. Shortly after leaving New Zealand, Sandra and Paul learnt that James had killed himself. Sandra and Paul immediately returned home.

Sandra and Paul submitted an insurance claim for the unused portion of their river cruise and the costs of re-arranging their air tickets to return home. Sandra and Paul’s insurer declined their claim, referring to an exclusion clause in the policy:

We will not pay under any benefit of this policy for claims arising directly or indirectly out of:

  • suicide…of your relative…”

Sandra did not accept the insurer’s decision and complained to FSCL.

Sandra’s view

Sandra explained that James’ death was completely unexpected. Although Sandra and Paul were aware James was grief stricken following the death of his father, they had no idea that he had been to a doctor or was on medication for depression. Sandra said the insurer’s decision was extremely unfair and discriminatory, and that if James had died as a result of an accident the insurer would have accepted the claim. Sandra considered the insurer was discriminating against them because James’ death related to a mental illness, of which they were unaware.


We had some sympathy for Sandra’s point of view. The policy provides cover for the unforeseeable death of a relative. From Sandra and Paul’s perspective, James’ death was unforeseeable. However, the policy also included a widely drafted exclusion for any claim directly or indirectly relating to the suicide of a relative. In our view, the policy wording was clear and the insurer was entitled to decline the claim.

The New Zealand Human Rights Act 1993 prohibits discrimination on the grounds of disability, including psychiatric illness, unless the insurer has actuarial data to support the assessment of risk. We are aware of legal developments in this area in Australia, and in particular, we note decision 428120 of the Financial Ombudsman Service in Australia.

However, in the case before us the insurer did not rely on a blanket mental illness exclusion, but rather excluded a particular event from cover


We explained to Sandra that we were satisfied the insurer was entitled to decline her claim. Sandra accepted our explanation and agreed to withdraw her complaint.

Key insight

Some insurers are now providing cover for mental illness. It is arguable that mental illness should be treated the same as any other illness, and that insurers should not be able to apply blanket exclusion clauses without robust actuarial data to support their risk assessment of mental illness claims. This issue may be one for the Human Rights Commission to consider at a future date.