A claimant will not be paid after losing a proximate cause dispute over the collapse of a cruise company that was affected by the covid pandemic. 

The traveller booked a cruise for March 2020, but it was cut short due to the pandemic. The provider, referred to as CM, offered the passenger a full refund of money already spent and discounts for future trips.  

The claimant booked a second cruise for March 2021 using the discounts. However, in July 2020, CM announced it was entering administration, citing losses “directly related to covid-19 and beyond our control”. 

CM offered the claimant reimbursements for unused travel benefits, but the man did not accept them and filed a claim with his insurer to have the losses covered by his travel insurance. 

Zurich Australia declined the claim, noting the pandemic led to the cancellation. The insurer referred to its policy, which excluded claims “arising from an epidemic, pandemic or outbreak of a contagious disease”.

The complainant said the leading cause of the loss was CM’s insolvency and inability to have its debts refinanced by its bank. He said his cruise would not have been cancelled if the banks had refinanced the provider. Travel provider insolvency was covered by his policy. 

The Australian Financial Complaints Authority has acknowledged the impact of the company’s financial collapse. However, it says the primary reason it entered administration was covid-related factors, noting statements from CM’s chief executive that emphasised its operations were “cut short by this unprecedented global pandemic”.  

“In my view, it is clear from these statements that CM went into administration because of the impact of the covid-19 pandemic,” the authority’s dispute ruling says. “I also note the administrators’ reports outline how CM’s cruise operations were suspended because of the ongoing covid-19 pandemic and lockdown measures. 

“The effect of the suspension resulted in lack of income and restricted cash flow, prompting CM to seek the possibility of obtaining further lending.” 

The authority says it is possible for a loss to have more than one cause. 

“To determine the insurer’s liability for the claimed damage, it is necessary to determine the proximate cause of the damage. This is a question of fact depending on the circumstances. The proximate cause is not necessarily the first or last or the sole cause of the loss. It is the effective, dominant or operative cause of the loss.” 

The authority says the insurer was entitled to decline the claim. Zurich did offer to refund the complainant for the policy premium, and the authority has backed this. 

Click here for the ruling.