Chubb has won a dispute after it declined a claim for the cost of international flights cancelled due to COVID because the airline, which no longer flies to the original destination, offered credit for the full $5610 cost.

The complainants held Chubb business travel insurance and claimed for the flights, which were booked in February 2020 for a family trip to the UK the following Christmas.

The airline, which was unable to provide a cash refund as it went into administration, offered credit valid until mid 2023 which could be used for any flights, products and services and was name changeable.

Considering the flexible terms, Chubb said the credit fell under its policy exclusion for expenses recovered from another source and so it was entitled to decline the claim. It offered to reassess the claim if the airline did not honour the credits, or if borders remained closed by the airline’s required booking date of July 31 2022.

The Australian Financial Complaints Authority (AFCA) ruled the travellers had established a valid claim but had not yet suffered an unrecoverable loss, and so Chubb was entitled to take no action for the time being.

“The insurer is not liable … in circumstances where the airline is prepared to offer full future flight credits in lieu of a cash refund,” AFCA ruled. “The complainants must act reasonably to mitigate loss. This includes exploring the offer made by the airline.”

The cost of the airfares may become an unrecoverable loss under the policy if various circumstances still pertained at the booking date deadline next year, the AFCA ombudsman said.

The travellers said being required to wait for “an inordinate period” to be returned to the position they were in before the loss meant Chubb was not acting in good faith. They could not book an international flight to the UK due to international travel restrictions and the airline no longer offering UK flights.

They sought the cost of the flights from Chubb and offered to sign over any available airline credits so there was no betterment. One of the travelling party had recently changed employment and could not secure enough leave in the immediate future, they said, and was also now in a high-risk category after turning 50 which may curtail any international travel for the foreseeable future.

Using the airline credit for local regional holidays was not the equivalent indemnity for the loss, they said, arguing also that the provision of travel credits did not meet the meaning of recovered expenses.

AFCA said it did “not accept the male complainant is vulnerable solely because of his age” and the policy did not respond to any additional cost which may arise from any increased costs of rescheduled international flights.

“While accepting the difficulties faced by the complainants, I am not persuaded by their argument,” the ombudsman said.

“The pandemic has created many uncertainties and complications including the airline’s inability to provide a cash refund as it went into administration. I do not accept in all the circumstances it is unreasonable to wait until July 31 2022 to assess whether the current difficulties posited by the complainants still pertain and whether the complainants will be able to use the future flight credits at that time.”

Chubb said its policy did not respond to the loss of enjoyment and only to monetary loss.

“I agree,” the ombudsman said, adding the complainants had “proposed the insurer commit to a course of action which I do not consider is required at this time”.

AFCA said the parties could return to it if unable to resolve the claim by the airline’s due booking date next year.

See the full ruling here.