Insurer wrong to deny travel claim by saying deceased relative broke law

A travel insurer has been ordered to pay $18,000 after incorrectly denying a claim after the policyholder’s brother-in-law was killed in a road crash days before the trip was due to start.

The man and his wife held a domestic travel policy with Tokio Marine & Nichido Fire Insurance and were due to leave on January 24 2020.

But the sudden death of the wife’s brother on January 22 2020 meant the trip had to be cancelled and the couple claimed on the policy.

The insurer denied the claim, saying it was excluded because the relative had broken the law. It pointed to a police report that suggested the deceased was driving at speed or in a manner which was dangerous to the public.

The exclusion in the PDS reads: “We will not cover any claim arising from or related to the following: You or Your Relative acting illegally or breaking any government prohibition, laws or regulation including visa requirements or a government authority detaining anyone, or confiscating or destroying anything.”

The insured argued that reliance on the police report alone is not reasonable because there were no witnesses to the accident and there were other errors in the report, and he took the policy out to cover himself and his wife, not their relatives and their actions.

He took his case to the Australian Financial Complaints Authority (AFCA), which ruled the claim must be paid.

AFCA says the insurer has interpreted the exclusion too broadly.

“I am of the opinion its intention is to apply to instances that may arise during the period of travel and that relate to the insureds and any relatives that may be travelling with them,” the ombudsman writes.

“There are no examples which refer to minor civil offence nor to breaches of local road laws.

“I am satisfied it is fair in all the circumstances to accept that on the simple reading of this policy provision, one would understand it to apply to instances/events that may occur whilst the insured is travelling and relates to prohibitions, laws or regulations associated with and/or during their travels.”

AFCA also says the police report alone does not prove that the wife’s brother was breaking the law.

“As the party seeking to rely on the exclusion to decline the claim, the insurer bears the onus to establish, on balance, that the loss claimed is because of circumstances excluded by the policy,” it says.

“The police incident report alone does not satisfy the insurer’s onus in this regard.”

The claim for $18,790 minus a $100 excess must be paid, plus other entitlements if relevant proof of loss is made available by the complainant.

Click here to read the full determination.