A man whose international flight was cancelled due to the COVID pandemic and his airline becoming insolvent has lost a claim dispute with his insurer and been advised to try again in 2023 if a credit voucher offered by the carrier expires.

The man purchased a Mitsui Sumitomo Insurance Company travel policy in late 2019 for a trip he intended take last year in the first two weeks of October.

When the flight was cancelled, he requested a refund from the airline. He was instead offered a credit voucher which could be used to rebook a different flight by the end of 2022. The airline refused a refund, saying in an email it was temporarily legally restricted from refund processing.

The man then submitted a claim seeking the flight costs and the policy premium he had paid.

Mitsui Sumitomo said the trip did fall within the scope of cover as it was cancelled due to government restrictions imposed after a pandemic.

However, it declined the claim on the basis the policy only responded if expenses were not recoverable from any other source. As the airline credit was for the full value of the flights, the traveller had not suffered a loss under the policy, the insurer said.

The man went to the Australian Financial Complaints Authority (AFCA) arguing he had established a valid financial loss as the airline was becoming insolvent and so the credit he had been offered was worthless.

AFCA said it was not satisfied the airline would be unable to eventually provide a refund or honour the credit.

If the policy were to respond now, the man “could potentially be doubly compensated for the flight costs” if he were to later make use of the credit voucher or obtain the refund, it said.

“I am not satisfied this outcome is fair or consistent with the commercial intent of the policy,” AFCA’s ombudsman said. “The policy is meant to cover unrecoverable travel losses and not create a situation that lends itself to double compensation.”

The airline had not rejected the request for a refund, AFCA said, only saying it was delayed.

It determined Mitsui Sumitomo’s offer for the man to submit a claim only if his credit voucher expired or could not be honoured by the airline was “fair in all the circumstances”.

“At this stage the complainant has not established an unrecoverable loss for the flights, given the valid credit voucher and potential refund available.

“If the complainant is unable to utilise the credit within the timeframe provided, or the airline will no longer honour the credit or the refund, I consider it may become an unrecoverable loss under the policy then,” the ombudsman said.

“I am not satisfied, on balance, the loss is unrecoverable at this stage, I do not consider it fair in all the circumstances to require Mitsui Sumitomo to cover the claim now.”

The flight expense may become an unrecoverable loss covered by the policy in 2023 after the expiry of the credit period, AFCA said, so a premium refund was not appropriate as the policy may respond in the future.

“Given the credit and a potential for a refund, I am not satisfied the complainant has established a loss that requires a policy response now,” the ombudsman said.

See the full ruling here.