A quick trip around the Covid-changed world of travel insurance

Planning to travel here or overseas? The pandemic has changed many things – including travel insurance policies. Morry Bailes takes a look at the fine print.

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Airlines are firing back up, itineraries planned, travel bags dusted off and vaccine passports gotten in order, because Australia is re-opening to the world.

We are a travel-mad nation and whilst there is risk, many of us are going to take it to see friends, family and our favourite places.

But have we properly evaluated the risk? Most of us are concentrated entirely on whether we are likely to get COVID. As we sit in a departure lounge holding our glass of pre-flight bubbles and mentally run through our list of must haves – passport, vax certificate, rapid antigen tests, COVID safe masks – some of us may have overlooked one of the fundamentals that may not only ruin a holiday but devastate our finances; adequate travel insurance.

I’ve got my AMEX Black travel insurance policy, you might think. Or my company’s corporate travel insurance.

In our enthusiasm to get back in the air or on the road, many travellers have not turned their minds to the altered reality of travel insurance, even if you have a current and valid policy. What you once had in travel insurance you may no longer, particularly when it comes to COVID.

The insurance industry was quick to pivot when the magnitude of COVID became known, to stem devastating losses, thus a proper understanding of what your policy provides – and more importantly does not provide – is critical reading before you even look at a flight schedule. So hold the bubbles and read on so we can have a good look at it.

The first and most basic legal element to understand about contracts of insurance is that they are just that, a contract. You are one party and the insurance company is the other. There is Federal and State legislation that in essence legislates that insurance companies must play fair, however there is no such beast as a standard insurance policy.

Every  contract of insurance whilst it may bear similarities to another is entirely independent, with its own provisions containing its terms and conditions. Unless some aspect of the contract of insurance offends the legislative framework underpinning the insurance industry in Australia it is binding when you enter into the contract, and as the High Court has recently made very plain, a contract is a contract. Your rights and entitlements will be determined by reference to that agreement, and that agreement only. Contracts of insurance insuring you against the risks of travel are no different in that respect, whether they are connected to a credit card or purchased as a one off insurance product. So careful reading and seeking advice when uncertain is essential.

Here are some handy pointers to reading an insurance policy. First you must gain an understanding of who is covered. Relying on a policy of insurance attached to your credit card may come with the assumption that other family members travelling with you are similarly covered. They may not be.

Second, understand your scope of cover. This can be broken down into fundamentally two things; what events or things are insured, and how much are those events or things insured for. It is no good getting COVID in the U.S, which had been covered by your policy, only to discover that if you need hospitalisation the amount of cover is insufficient.

Third – and really part of the process of properly understanding your scope of cover – is to gain an understanding of what is excluded. And that’s the kicker. Many travel policies have wholly or partially excluded COVID, or changed what you might expect from ‘usual’ travel insurance coverage when it comes to COVID.

Never has the Latin legal maxim caveat emptor, let the buyer beware, been more germane.

Some real examples of how insurance policies now read helps underscore the point. Many corporate policies used to cover directors or executive office holders for not only corporate but personal travel. In a major change by insurers, that is often no longer the case. The corporate travel may still be covered but it is dangerous to assume any element of personal travel will be, even if your trip starts with business and turns into recreation.

One well known insurer in the Australian market now provides in its corporate travel policy an exclusion as follows:

“We will not pay benefits with respect to any loss, damage, liability, Event, Bodily Injury or Sickness directly or indirectly arising from, relating to or in any way connected with the Coronavirus Disease 19 (COVID-19) (or any mutation or variation thereof or any related strain) and/or its outbreak where the Covered Person was undertaking Directors and Executives Private Travel.”

So the purpose of travel has become all important. Personal travel is out in this instance – and maybe in many travel insurance policies across Australia. You may be assuming  based on past experience that you have travel insurance which on closer inspection does not exist.

There is also the possibility that whilst a travel policy operates normally for all other risks, there is a more blanket exclusion for COVID. One insurer excludes liability in this way:

“No cover is provided for any Claim in any way caused by or resulting from: a. coronavirus disease (COVID-19); or b. severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2); or c. any mutation or variation of SARS-CoV-2; or d. any fear or threat of a), b) or c) above.”

Moreover, many insurers are excluding what is known in the industry as ‘cancellation or disruption’ cover within policies. Cancellation and disruption self evidently has nothing to do with contracting illness; it is when related events occur, such as border closures that are indirectly caused by COVID but not covered by the insurance policy. It is a classic scope of cover point.

In a real life example I learnt about recently, a New South Wales couple planned and booked their wedding for the Byron Shire in northern New South Wales for a Saturday this November. Due to the COVID outbreak in New South Wales, the wedding was moved to Corrumbin Valley in southern Queensland as this was the easier destination for interstate guests to attend because of significant lockdown and quarantine rules for interstate guests visiting New South Wales. Unfortunately, Queensland then implemented a hard border closure with New South Wales, meaning the unfortunate couple couldn’t attend their own wedding. So a decision was made to relocate the nuptials back to New South Wales, which by now was relaxing restrictions. Whilst that now suits the bride, groom and some of the guests, what of the losses sustained through cancelled flights and accommodation for Queensland which has no travel restrictions with most states?

The answer unfortunately for one South Australian family is that their insurer excludes cancellation and disruption for a ‘foreseen circumstance’ and considers that from Australia’s declaration of the COVID pandemic in March last year, COVID is and remains a ‘foreseen circumstance’. In short, there is no cover for those losses at all. All when they had the foresight to obtain travel insurance, but with a sufficiently limited scope of cover to be of no help whatsoever. What’s more, this is largely the norm now in many travel insurance policies in Australia.

Never has the Latin legal maxim caveat emptor, let the buyer beware, been more germane.

But wait – what if an airline or travel or tour operator says we’ve got it covered, travel insurance is included? It is unsurprising in a world where travel, COVID and insurance are not always found together in the same sentence in a way favourable to the consumer, that travel companies will be doing side-deals with insurers to keep the doors open and keep the customers coming.

Such insurance ‘add-ons’ are certainly worth examining, but examine you must. It may prove very helpful as an insurance ‘filler’ where other insurance cover is unavailable and could pick up liabilities specific to that service. As with other retail travel insurance though, it is vital to understand the extent and limitations of the product. Also, some tour operators may operate in other countries and have their insurance rules and disputes dealt with outside Australia. Different rules and regulations, and a different jurisdiction may complicate making a claim. Thus do not be lulled by these seemingly helpful offers, and get to grips with the detail.

This piece should be read not as a discouragement to travel but rather to do so without neglecting one of the most important ways to eliminate risk, good travel insurance. In other words, to travel, understanding that some but not all losses sustained through COVID may be insured. Of course it is critical in the first place to ensure COVID is not excluded altogether. After that it is a safe starting point to assume that the travel insurance policies of today will likely cover you for medical expenses if you actually get sick with COVID but not necessarily all other related losses, including in one policy, the ‘repatriation of mortal remains’ or ‘funeral expenses’ should circumstances take the worst of turns for you.

So as you plan your next travel jaunt, check not only refund and credit policies of airlines and other accommodation and travel industry providers, but your travel insurance policy. And if in doubt seek advice from an insurance broker or lawyer.

Cheers, bon voyage and safe travels, COVID notwithstanding.

Morry Bailes is Senior Lawyer and Business Advisor to Tindall Gask Bentley Lawyers, past president of the Law Council of Australia and a past president of the Law Society of South Australia.

Originally published InDaily 11/11/2021