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Coverage uncovered (travel)

An Ontario couple planned a trip to Peru for 20 days, with a departure date of April 18th, 2010. The trip included air fare and a package tour throughout the country. Total cost exceeded $9,000 for two persons and was pre-paid.

At the time of booking, they purchased insurance coverage for the following risks: trip cancellation & interruption, emergency medical, baggage & personal effects, flight accident and travel accident. The contract covered re-imbursement for “the unused portion of pre-paid travel arrangements.”

They departed on April 18th as planned. Unfortunately, the husband immediately fell ill upon his arrival in Lima, Peru and was hospitalized on April 19th. He was diagnosed with a heart problem and remained in hospital for 9 days until his condition was stabilized and he was able to return home to Canada with his wife. Unfortunately, as a result of his hospitalization, the couple was unable to participate in the country wide tour they had previously booked since it departed from Lima on April 20th.

While her husband was in hospital, the wife was required to obtain hotel accommodation in Lima. Naturally, they also incurred a variety of medical and related expenses associated with the husband’s hospital stay.

Shortly after their return to Ontario, the couple submitted a claim under their travel policy. The insurer denied a large portion of their expenses and issued a letter stating that the loss was not fully covered under the insurance policy. In its letter, the insurer quoted the following policy provision: “What is not covered? … 2. This insurance does not cover any loss, claim or expense of any kind caused directly or indirectly from: c) pre-paid travel arrangements for which an insurance premium was not paid”. The insurer further stated that the couple’s insurance policy limited them to a maximum reimbursement of $400 per person for pre-paid travel arrangements.

Upon receipt of the insurer’s letter, the husband contacted the insurer through its call centre asking why he did not have coverage for the total cost of the pre-paid travel expenses. The representative could not satisfy his enquiry and after several unsuccessful calls to the insurer, the consumer called OLHI.

In accordance with OLHI’s process, his call was promptly routed to a Dispute Resolution Officer (DRO) for assistance. She discussed the facts giving rise to the claim with him, as well as the insurer’s position as described in its letter. From their conversation, she concluded that the “What is not covered” section of the contract quoted by the insurer in its letter did not apply in these circumstances because the consumers had purchased a travel policy that covered all risks, including the “unused portion of pre-paid travel arrangements”.

Our DRO advised him to respond to the insurer’s letter in writing, including the documentation requested by the insurer and references to the terms of his policy applicable to his claim.

Based on our DRO’s advice, the husband sent a letter to his insurer on July 28th. A few weeks later, she received a call from the husband thanking her for her assistance and confirming that he had received a reimbursement of more than $9,000 from the insurer.

As they talked further, it appeared that an administrative error had been the cause of the earlier denials by the insurer. Once the consumer wrote back, quoting the nature and the types of coverages he had contracted for as recommended by our DRO, the error was quickly identified and the claim was promptly paid by the insurer.

Disclaimer: Names, places and facts have been modified in order to protect the privacy of the parties involved. This case study is for illustration purposes only. Each complaint OLHI reviews contains different facts and contract wording may vary. As a result, the application of the principles expressed here may lead to different results in different cases.