The Insurance & Financial Services Ombudsman has rejected a claim by an insured under their travel insurance policy.  The insured had arranged a trip to the USA which involved a classic car hire package, as they were intending to drive Route 66.  They prepaid $14,000 for the package of accommodation and classic car hire, but the hire company went into dissolution before the trip and the insureds lost their deposit.

The insurer declined the claim because of an exclusion in the policy for claims arising from financial collapse of any service provider. 

Although it would seem that buying travel insurance to protect you from financial collapse would be a normal expectation, the Ombudsman held that the exclusion of such cover is common in travel policies and there was no duty on the insurer to bring this exclusion to the notice of the insured.  The duty was on the insured to read and understand the terms and conditions of the policy and they should have noticed that the policy excluded financial collapse.

It pays to read the fine print very carefully when arranging insurance, or you may not get the cover you are expecting.

Alan Knowsley

Insurance Lawyer