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Travel Insurance Dispute Highlights Pre-Existing Condition Clause

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In a recent case that underscores the importance of understanding insurance policy clauses, a man who cut short his vacation in the United States to be with his terminally ill sister-in-law has been denied an insurance payout.

The ruling, made by the Australian Financial Complaints Authority (AFCA), favored the travel insurer due to the claimant’s lack of coverage for pre-existing medical conditions of relatives.

The situation began when the policyholder purchased travel insurance for a family holiday scheduled to begin on December 12, 2023. Shortly after arriving in the U.S., the man was informed of his sister-in-law's critical health decline due to metastatic colorectal cancer. He returned home to be with her in her final days, later resuming his vacation on December 23.

However, upon claiming for the abrupt change in travel plans, the insurer, AWP Australia, denied the claim. They stated that the policy explicitly excluded coverage for incidents related to pre-existing medical conditions of the insured’s relatives. The sister-in-law’s diagnosis of cancer and a pulmonary embolism had been established for nearly a year prior to the start of the policy coverage.

The case highlights a common oversight among travelers: not accounting for family members' significant medical histories while planning their travels. Even though the policy allowed for early return and resumption of journey benefits, these did not apply as the sister-in-law's health condition predated the travel insurance policy.

The policyholder argued that the policy had not explicitly required him to disclose his sister-in-law’s medical background, which he felt was unfair. He also mentioned experiencing substantial financial hardship due to the rejection of his claim. Nevertheless, AFCA supported the insurer's decision.

In summarizing the decision, the AFCA ombudsman stated, “I acknowledge the complainant was not aware that [his sister-in-law] may fall seriously ill and pass away when he commenced his holiday. However, I am satisfied the exchanged information shows death was caused by her pre-existing medical conditions for the purposes of the policy. In the absence of any other information, I am satisfied the insurer is entitled to deny the claim.”

This resolution accentuates the criticality of reading and comprehending the exclusions present in travel insurance policies. Policyholders should be fully aware of what constitutes a pre-existing condition and how it may impact claim eligibility. The case serves as a cautionary tale for travellers to ensure all potential scenarios are accounted for in their insurance coverage. For further details, you can refer to the ruling as noted by Australian Financial Complaints Authority.

Published:Wednesday, 22nd Jan 2025
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

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Moral Hazard:
The concept that individuals may take on more risk when they do not bear the full consequences of that risk, often relevant in insurance scenarios.

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