FSCL Case Study

In March 2020,  a couple were overseas in the United Kingdom when they heard the call from the New Zealand government to return home due to the Covid-19 pandemic. Although they were intending to travel home on April 6, 2020, they were able to bring their departure date forward to March 24, 2020. After checking with their insurer that they had cover, they abandoned their plans to fly home through Singapore, with a side trip to Bali, and purchased new, more expensive tickets, to fly straight home through Canada.

Fortunately, they received their money back from the cancelled tickets, but the new tickets cost $7300.

The pair’s insurer accepted their claim but, from the couple’s perspective, did not pay the full amount of their loss. They complained to FSCL.

They calculated that the insurer owed them $4900. They reached this figure by subtracting the original cost of their tickets home ($2400) from the cost of the new tickets flying through Canada ($7300).

The insurer calculated that it owed the couple $3700. The insurer deducted the full cost of the refunded tickets, $3600, which included the cost of the tickets to and from Bali from the new tickets flying through Canada ($7300).

The insurer referred to the policy wording which stated “…we will pay up to the policy’s maximum benefit for reasonable additional travel and accommodation expenses ... The amount claimable will be less any amounts refundable on unused tickets.”

The pair did not accept the insurer’s explanation, saying that no one would fly via Bali to return to New Zealand. The trip to Bali was a side trip, requiring a return flight to Singapore. They said the insurer should only deduct the cost of the direct flight from the United Kingdom to New Zealand from the cost of the replacement tickets.

Under the policy the insurer agreed that if the couple were unable to complete their journey due to circumstances beyond their control,
the insurer would pay the reasonable additional travel and accommodation expenses, less any refunds from unused tickets. The literal
interpretation suggested the insurer’scalculation was correct. However, when this clause was read in the context of the section as a whole, it was our view that insurer was only entitled to deduct the cost of refunded tickets for the same or similar services from the additional
travel expenses.

When comparing their planned trip home with their actual trip home, it was FSCL’s view that the flight from the United Kingdom to New Zealand, through Singapore, was similar to their actual flight through Canada. As there was no diversion on the Canada trip that could be compared to the diversion to Bali, FSCL found that the insurer could not deduct the refunded tickets to Bali from the amount payable under the claim.

FSCL suggested that the insurer reconsider its position and pay the claim as calculated the insured. The insurer agreed, and paid the couple $1200, being the difference between the amount the insurer had already paid ($3700) and the true cost of the claim ($4900). 

December 2020

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