In the fine print of every travel insurance policy is an exclusion for War. Over the years the meaning of War has expanded to cover a broad range of armed conflict and hostilities.
Since 7 October 2023, armed conflict has flared in the Middle East. Cruise lines have cancelled cruises. Tour operators have cancelled tours. Credits have been offered for future cruises and tours. Refunds have been offered with expenses deducted. Additional expenses for cancellations have not been reimbursed.
Dissatisfied travellers have turned to the cancellation cover in their travel insurance policies to claim for cancellation costs and additional expenses. Disputes have flared when insurers have invoked the war exclusion to deny claims made by insured travellers.
Some claim denials have led to appeals to the Australian Financial Complaints Authority (AFCA).
The summaries of the AFCA Determinations that follow are situations where travel insurance cancellation claims have been denied when the insurer has relied on the war exclusion for armed conflict and hostilities in the Middle East since 7 October 2023.
The cancellation cover and the war exclusion
The cancellation cover is along these lines:
What we cover: If during the period of cover, your journey is cancelled, rescheduled or shortened because of circumstances that were not expected or intended by you and are outside your control … we will reimburse you the non-refundable portion of unused travel and accommodation arrangements scheduled to be used by you during your journey, that you have paid in advance of cancellation and cannot recover in any other way, … and your reasonable costs of rescheduling your journey.
The war exclusion is along these lines:
WAR (whether war is declared or not) means a state of armed conflict between different countries, different groups or factions within a country, Nuclear, Biological or Chemical Terrorism, invasion, acts of foreign enemies, hostilities, or war-like operations or Civil War.
AFCA Determinations on the war exclusion
AFCA determination 12-25-204542
The traveller claimed cruise cancellation costs after his cruise itinerary was changed due to an armed conflict between one of the cruise’s stopover countries and a militant organisation. The new itinerary did not make a stopover in this country. This led the traveller to cancel the cruise, as he said the primary reason for his journey was visiting this particular country [the country was not named].
AFCA upheld the insurer’s denial because the policy did not cover the claim - although the itinerary was changed, the cruise was not cancelled. Even if the policy covered the claim, the war exclusion applied.
AFCA determination 12-24-148302
The traveller claimed additional expenses after his cruise to the Red Sea was cancelled by the cruise line because of the unrest in the Red Sea (where the cruise was going). The cruise was scheduled for October 2024. It was cancelled in June 2024. The cruise line provided a full credit for the value of the cruise. The additional costs claimed were incurred because the traveller needed to amend their travel plans. The policy provided cover for changes to a journey before departure because of an unexpected event.
AFCA upheld the insurer’s denial of the claim because of the ‘war and violence’ exclusion. AFCA said the situation in the Red Sea was more than ongoing unrest. The US Navy was involved in military operations for acts of foreseeable violence, such as attacks by the Houthi on ships with links or perceived links to Israel.
AFCA determination 12-00-1094484
The traveller claimed that the credit offered by the travel provider for her prepaid trip to Israel and Jordan which was cancelled due to the ongoing conflict in the region was worthless and claimed cancellation costs. The traveller had accepted the partial refund offered in lieu of the credit, from the travel provider.
AFCA observed that it considers a credit of at least 18 months from the time of issue offers real value to a customer. However, there may be extenuating circumstances which prevent an individual from travelling in the next 18 months, in which case the credit is of little to no value. Extenuating circumstances existed in this case due to illness of her husband and daughter who were to accompany her.
AFCA upheld the insurer’s denial of the claim because the war exclusion applied due to the conflict in Israel/Palestine which commenced in October 2023, i.e. ‘use of military force by any sovereign nation to achieve economic, geographic, nationalistic, political, racial, religious or other ends’.
AFCA determination 12-00-1079331
The traveller claimed cancellation costs. They had booked a holiday to Canada and to undertake a pilgrimage tour in the Middle East with their family. The tour company cancelled the prepaid tour to the Middle East. A letter from the tour agent dated 10 November 2023 stated:
This letter confirms the cancellation of the above-mentioned guests’ scheduled travel from October 13th to October 27th, 2023, due to the current situation in Israel. Please note that the amount paid for this transaction is NON-REFUNDABLE, as communicated to the customers in the provided invoice.
The tour company refunded 48% of the tour price.
AFCA was satisfied that the claim was valid in that the prepaid tour cancellation was unexpected, unforeseen and was outside the claimant’s control.
But the war exclusion applied because there was an armed conflict involving Israel, and other parties within Palestine. It was not necessary for Palestine to be considered a country for the war exclusion to apply.
AFCA determination 12-00-1078986
The traveller claimed additional expenses after her travel agent cancelled the entire prepaid tour because the shipping line cancelled the Mediterranean, Middle Eastern and African cruise (highlight of the tour), due to the situation in the Red Sea and Suez Canal. The travel period was to be from 28 March 2024 to 3 May 2024.
AFCA said that while the cancellation came within the policy because it was unexpected, unintended, and outside of her control, the war exclusion applied because of the threat of terrorism – i.e. the threat of attack upon cruise ships.
Conclusion
The fact that AFCA decided in favour of the insurer in all the Determinations illustrates the broad scope of the war exclusion to exclude claims for travel cancellations.
As a result, travellers rely upon the goodwill of the cruise line and tour operator. The cruise line has conditions of carriage, the tour operator booking conditions / terms and conditions, which have a ‘force majeure’ exclusion. The wording of that exclusion is very similar to the war exclusion and operates in the same way.
The traveller needs to accept what the cruise line and tour operator offer and forget about a travel insurance claim.