Southern Cross Benefits has prevailed in a dispute over its decision to deny a travel claim for losses incurred as a result of COVID-19, citing a pandemic exclusion in the policy.

The Australian Financial Complaints Authority (AFCA) ruled the insurer is entitled to reject the claimants’ bid for compensation, having established clearly the policy does not cover losses, either directly or indirectly, arising from an illness that has been declared a pandemic by the Australian Government or World Health Organisation (WHO).

Southern Cross had offered, as a gesture of good faith, to refund the complainants $1191.54, the portion of the unused policy premium when their 44-day cruise was cancelled suddenly on March 14 by the travel operator. At that time, the WHO had already declared the disease outbreak a global health emergency.

But the complainants, who were stranded in Miami when the cruise was cancelled, declined the offer, submitting they were entitled to full compensation from the insurer for cancellation losses as well as extra expenses incurred to arrange for their flights back to Australia.

When they made the claim on March 24 they had already received from the cruise operator a full refund of the fare, pre and post cruise hotel packages, pre-paid shore excursions and other pre-paid items, taxes, fees and port expenses.

The complainants say when their policy was activated in December last year, covering the travel period of March 13 to April 30 this year, COVID-19 was not a known event and therefore they should be covered for their losses.

AFCA says it accepts the complainants had established a valid claim, but Southern Cross Benefits has demonstrated why it is entitled to invoke the pandemic exclusion to reject the bid for compensation.

“Any decision made on a claim is based on the provisions of the contract of insurance (policy),” AFCA said. “The policy clearly excludes from cover any claims directly or indirectly arising from, related to or associated with an epidemic/pandemic illness.

“Therefore, the fact that COVID-19 did not exist at the time the policy was arranged, does not assist the complainants in this instance.”

Click here for the ruling.