In early February 2020 David purchased tickets, through his travel agent, for overseas travel in April/May 2020. On 25 February 2020 David, again through his travel agent, purchased travel insurance for that trip. Unbeknown to David, on 30 January 2020, his travel insurer had announced that they would be treating Covid-19 as a known event. Later, on 28 February 2020, the insurer announced they would be relying on the policy exclusion for pandemics to decline all claims for loss arising directly or indirectly from Covid-19.
The countries David intended to travel to closed their borders on 26 March 2020 and David had no option but to cancel his trip.
David submitted an insurance claim for his lost travel and accommodation costs. The insurer declined the claim relying on the exclusion clause for loss arising directly or indirectly from the pandemic. The insurer said there was plenty of information available on their website explaining that Covid-19 was a known event when David purchased the travel and insurance, and he should have known there would be no cover. David did not accept the insurer’s decision and complained to FSCL.
David was unaware of the insurer’s policy announcements on their website because he had arranged his insurance through a travel agent who had not mentioned the implications of Covid-19 on his insurance cover. David said the insurer had breached both the Consumer Guarantees Act and the Fair Trading Act by failing to draw these announcements to his attention.
By 30 January 2020 the insurer knew they would not be covering Covid-19 related claims but did not tell David. As a result, David said, the policy he had purchased was not fit for purpose, as required by the Consumer Guarantees Act. David also said the insurer’s failure to tell him about the Covid-19 exclusion was misleading and deceptive conduct and a breach of the Fair Trading Act.
The insurer did not accept that either Act applied to David’s complaint and said that the policy exclusion for loss arising from a pandemic applied, allowing them to decline the claim.
It was our view that, regardless of any announcement from the insurer, the policy always allowed the insurer to decline a claim arising directly or indirectly from an actual or likely pandemic or epidemic. There was no dispute that David’s claim arose from Covid-19 and that the insurer was entitled to decline the claim.
However, David had raised other arguments that we had to consider.
Consumer Guarantees Act
We were satisfied that the Consumer Guarantees Act did not apply. Section 29 requires services supplied to a consumer to be reasonably fit for a particular purpose. The fact that there was an exclusion for loss arising from a pandemic did not mean the policy was not fit for purpose. The policy would have covered many other circumstances, for example, lost luggage or the inability to travel due to ill health. When David purchased the policy no one knew that international travel would be impossible in April/May 2020.
Fair Trading Act
Whether David was misled or deceived by the insurer’s failure to draw his attention to the insurer’s decision to treat Covid-19 as a known event was more difficult to say. It would have been helpful if the travel agent arranging David’s travel had drawn his attention to the Covid-19 announcement. However, the policy clearly excluded cover for pandemics and, as the insured, David was obliged to read the policy to make sure it would meet his needs.
Even if we had found that the insurer withheld information that could amount to an actionable misrepresentation under the Fair Trading Act, and we had not made such a finding, we would need to consider whether this action had caused David a loss. David had already bought and paid for his travel before buying his insurance.
If the insurer had told David that they would not cover Covid-19 when he purchased the policy, he would have had the option of looking for insurance cover elsewhere. However, from our experience, by February 2020 no insurers were offering cover for Covid-19. Even if David had known that this policy would not cover him for Covid-19, he would not have been able to find alternative cover through another insurer, so his position was unaffected by the insurer’s failure to communicate.
We issued our decision explaining that the insurer was entitled to decline the claim under the policy exclusion for loss arising from a pandemic, the Consumer Guarantees Act did not apply, and there was no loss attributable to the insurer’s failure to draw David’s attention to information about cover available for Covid-19 related loss.
Insights for consumers and participants
Where the policy wording is clear, we have to apply it. However, there could be other legal arguments that override the policy wording, and we will carefully consider all arguments put before us. In this situation, we were satisfied that no loss flowed from the failure to communicate, but if David had been able to show that he could have got alternative cover elsewhere that would have covered him for Covid-19 related loss, our decision might have been different.