FSCL Case Study

In November 2019, a woman booked a trip to the Bahamas. She was scheduled to fly from New Zealand to Houston on 12 April 2020, and then onwards to Nassau, the capital of the Bahamas. The following day, she would fly from Nassau to Freeport, where she would stay for a week, before returning to New Zealand on 20 April 2020.

On 1 April 2020, the woman’s travel agent informed her that her flights between New Zealand, Houston and Nassau had been cancelled, but the airlines had issued her a refund. 

She lodged a claim with her travel insurer for the Freeport flights, which hadn’t been cancelled, but couldn’t be used since she couldn’t get to Nassau.

The woman’s insurer declined her claim due to an exclusion in her policy for claims arising from government interference. The insurer said New Zealand’s lockdown, which began on 25 March 2020 and continued throughout April 2020, would have interfered with her trip.

The insured complained to FSCL because she thought the government interference exclusion shouldn’t apply to her claim.

She said the laws in place in New Zealand on 1 April 2020, that were enforcing New Zealand’s lockdown, had been determined as ‘unlawful but justified’ by the courts following the ‘Borrowdale case’ about the legality of New Zealand’s lockdown. 

She argued that since the government restrictions stopping her from travelling were technically unlawful at the time her trip was cancelled, there was no government interference with her trip.

The insured also thought it was unfair for the government interference exclusion to apply in the absence of a pandemic exclusion, since ultimately her trip was cancelled due to Covid-19.

When investigating the complaint, FSCL found that the airline operating the New Zealand-Houston-Nassau flights had issued a press release on 16 March 2020 publicly announcing an 85% reduction in their international network due to reduced demand. In this announcement, the airline confirmed they would not be operating flights between New Zealand, Houston and Nassau in April 2020.

Although the airline didn’t formally cancel the woman’s flights until 1 April 2020, FSCL thought the disruption to the trip rose when the airline issued their press release on 16 March 2020, at which time New Zealand’s lockdown hadn’t been announced.

FSCL issued a preliminary decision upholding the complaint, because it thought the government interference exclusion shouldn’t apply to exclude the insured’s claim. 

In FSCL’s view the claim for the George Town flights arose from the airline cancelling her flights from New Zealand to Nassau due to reduced demand on 16 March 2020, not government interference with her trip.

FSCL said the media release was clear and detailed about which flights were being suspended in April 2020. 

It thought it was unlikely the airline would reverse their decision, and, even if they did, it was unlikely that the situation would change for the better so they could expand their network again by April 2020.

FSCL found it was reasonable that the formal cancellation was slightly delayed, since the airline would have had thousands of passengers to contact. 

FSCL thought it would be unfair for the outcome of the complaint to turn on the length of the airline’s delay, as it would come down to luck whether the airline notified the insured of the cancellation before or after any government interference arose.

FSCL issued a final decision upholding the complaint.

March 2021

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