With the current turbulence due to conflict in the Gulf region of the Middle East we are again reminded of the importance of insurance, in addition to the limitations of insurance.
As time progresses and we have all faced assorted disruptions to travel – 1st Gulf War; Sep 11th; Tsunami; Paris bombing; Covid; insurance companies (driven by underwriters) have changed terms in their policies to reduce exposure and/or increased premiums to cover more aspects.
In general, the majority of travel insurances now exclude a claim if it is related to ‘war’. There have been some exceptions, but this is rare and is usually related to a total insurance policy devised by a broker for an institution where the travel policy is part of the overall insurance – buildings, chattels, liability etc. We have been dealing with some groups who cancelled due to flights with a Gulf carrier. One had such a business insurance and whilst war was an exclusion it defined countries related to the use of the war clause, ie ‘if the war involved Somalia. The claimable amount was also defined and varied according to the perceived risk of conflict with that said country. In this current situation Iran was not defined so the dollar amount of what was claimable was the best possible – not 100%, but far better than hoped for! This is rare and is not found in general ‘one off’ normal travel policies.
Anthony Cordato, a lawyer with knowledge of this area recently wrote in e global travel media the following interesting outline.
In the fine print of every travel insurance policy is an exclusion for War. Over the years, the meaning of War has expanded to cover a broad range of armed conflicts and hostilities.
Since 7 October 2023, armed conflict has flared in the Middle East. Cruise lines have cancelled cruises. Tour operators have cancelled tours. Credits have been offered for future cruises and tours. Refunds have been offered with expenses deducted. Additional cancellation expenses have not been reimbursed.
Dissatisfied travellers have turned to the cancellation cover in their travel insurance policies to claim for cancellation costs and additional expenses. Disputes have flared when insurers have invoked the war exclusion to deny claims made by insured travellers.
Some claim denials have led to appeals to the Australian Financial Complaints Authority (AFCA).
The summaries of the AFCA Determinations that follow are examples of travel insurance cancellation claims that have been denied when the insurer has relied on the war exclusion for armed conflict and hostilities in the Middle East since 7 October 2023.
THE CANCELLATION COVER AND THE WAR EXCLUSION
The cancellation cover is along these lines:
What we cover: If during the period of cover, your journey is cancelled, rescheduled or shortened because of circumstances that were not expected or intended by you and are outside your control … we will reimburse you the non-refundable portion of unused travel and accommodation arrangements scheduled to be used by you during your journey, that you have paid in advance of cancellation and cannot recover in any other way, … and your reasonable costs of rescheduling your journey.
The war exclusion is along these lines:
WAR (whether war is declared or not) means a state of armed conflict between different countries, different groups or factions within a country, Nuclear, Biological or Chemical Terrorism, invasion, acts of foreign enemies, hostilities, or war-like operations or Civil War.
AFCA DETERMINATIONS ON THE WAR EXCLUSION
Here are two examples. The full version (and more) of these determinations can be accessed by clicking the link in the heading.
AFCA determination 12-25-204542
The traveller claimed cruise cancellation costs after his cruise itinerary was changed due to an armed conflict between one of the cruise’s stopover countries and a militant organisation. The new itinerary did not make a stopover in this country. This led the traveller to cancel the cruise, as he said the primary reason for his journey was visiting this particular country [the country was not named].
AFCA upheld the insurer’s denial because the policy did not cover the claim – although the itinerary was changed, the cruise was not cancelled. Even if the policy covered the claim, the war exclusion applied.
AFCA DETERMINATION 12-00-1094484
The traveller claimed that the credit offered by the travel provider for her prepaid trip to Israel and Jordan, which was cancelled due to the ongoing conflict in the region, was worthless and that she incurred cancellation costs. The traveller had accepted the partial refund offered in lieu of the credit from the travel provider.
AFCA observed that it considers a credit of at least 18 months from the time of issue offers real value to a customer. However, there may be extenuating circumstances that prevent an individual from travelling within the next 18 months, in which case the credit would be of little to no value. Extenuating circumstances existed in this case due to the illness of her husband and daughter, who were to accompany her.
AFCA upheld the insurer’s denial of the claim because the war exclusion applied due to the conflict in Israel/Palestine, which commenced in October 2023, i.e. ‘use of military force by any sovereign nation to achieve economic, geographic, nationalistic, political, racial, religious or other ends’.
He further concludes – that as AFCA decided in favour of the insurer in most Determinations illustrates the broad scope of the war exclusion, which excludes claims for travel cancellations.
And his further conclusion may not sit well with all but is the current reality.
As a result, travellers rely upon the goodwill of the cruise line and tour operator. The cruise line has conditions of carriage, the tour operator booking conditions/terms and conditions, which have a ‘force majeure’ exclusion. The wording of that exclusion is very similar to the war exclusion and operates in the same way. The traveller needs to accept what the cruise line and tour operator offer and forget about a travel insurance claim
