A 72-year-old woman who cancelled a family trip to South Australia due to health concerns over the coronavirus outbreak and later lodged an unsuccessful claim with AIG for travel losses has won in her complaint filed against the insurer.

The Australian Financial Complaints Authority (AFCA) ruled against AIG, overturning an earlier preliminary assessment that concluded the claim could be denied since it was triggered by a change of plans on the part of the woman and her 76-year-old husband.

The woman had rejected the preliminary assessment, maintaining she and her husband did not cancel the trip on March 4 because they changed their minds. The unforeseen outbreak of COVID-19 and media reports that people over the age of 60 faced a higher risk of contracting the virus were what prompted them to pull out of the trip.

The rest of the family, who were also insured by the same policy, had proceeded with the week-long holiday.

AFCA in its ruling says AIG has no grounds to rely on an exclusion in the domestic travel policy to deny the claim for unrecoverable flight costs, subject to any applicable excess.

The travel policy covers for cancellation or amendment of airline ticket “due to an unforeseeable event or any unforeseeable circumstances outside your control”. There is however an exclusion in connection with “you or your travelling companion changing your mind and deciding not to proceed with your original trip”.

Both parties accepted the development of COVID-19 was an unforeseeable event outside of the complainant’s control but AIG says it was unnecessary for the complainant and her husband to cancel the trip to protect their safety.

AIG says at the time of the cancellation on March 4, there was no medical advice or government travel advisories against domestic travel and that the rest of the family went ahead with the trip.

The insurer says the exclusion therefore applies in this case but AFCA does not agree.

According to AFCA, concerns over COVID-19 have been escalating since the start of the year when China, where the outbreak is believed to have originated, confirmed on around January 20 human-to-human transmission of the virus.

The first four coronavirus cases in Australia were recorded by January 25 and cases continued to rise up through and beyond the complainant’s decision to cancel the trip on March 4.

“Given that the complainant and her husband are in their 70s, and domestic COVID-19 cases were continuing to rise, I am on the balance of probabilities satisfied they genuinely believed a cancellation of their trip was necessary for their safety,” AFCA ruled.

“A reasonable person in their situation would likely have considered it necessary to avoid non-essential travel for their own safety.”

AFCA says in this particular dispute, Section 54 of the Insurance Contracts Act is relevant as it does not allow a claim denial based on an act to protect safety.

“This means the insurer cannot decline their claim just because they changed their mind and decided not to travel,” AFCA said. “In short, the complainant and her husband’s decision to cancel their trip was an act necessary for the protection of their safety.”

Click here for the decision.