One particular travel insurance complaint handled by the ombudsman last year is worth paying attention to in particular detail, as nearly all of us are permanently connected to a smart phone and could easily find ourselves in this same trap.
Here’s the background:
John’s iPhone was stolen in the United States. He claimed $1,279 from his travel insurer for the loss. The insurer offered John $600, as his policy capped compensation for personal effects, such as lost phones, at $700 and handheld computers at $4,000. The insurance company argued that John’s iPhone was a phone. John argued that the iPhone was a “handheld computer”.
Unable to resolve the dispute, Financial Services Complaints (FSCL) was called in.
- An iPhone runs the same operating system as an iPad. The insurer classified iPads as “handheld computers”.
- The iPhone was not used as a phone on vacation and was not connected to a cellular network. The particular use(s) put to the iPhone were for gaming, internet and email.
John provided an opinion from a notable computer scientist. The computer scientist argued that the iPhone was a “handheld computer”. The computer scientist defined “computers” as devices that perform “general purpose computation”. The computer scientist supported John?s argument that, to determine whether an iPhone is a “handheld computer”, regard must be had to the particular use(s) put to the iPhone.
The insurance company’s arguments:
- The primary function of a device is important. The iPhone’s primary function is as a phone.
- The computer scientist’s “particular use” rationale could be applied absurdly. A laptop with Skype could be considered a phone. Modern fridges, televisions and cars could be considered “computers” as they can carry out “general purpose computation”.
- Computers are capable of programming, whereas an iPhone is a “closed source programme system” which is not capable of programming.
- John deliberately purchased an iPhone for its phone functionality: there are several other devices available in the market that can be used for gaming, internet and email, that do not have phone functionality.
FSCL noted that:
- The policy wording’s definition of “handheld computer”, which referred to PDAs and palm handheld devices (such as Palm Pilots), was outdated. It was drafted before smartphones were commonly available.
- A significant number of smartphones available in the market were worth more than $700.
- At law, when a term in a contract is ambiguous, the term must be interpreted against the party that drafted it.
The ombudsman accepted that the iPhone could reasonably be described as a “handheld computer” and recommended that the insurance company settle John’s claim. FSCL also recommended that the insurance company should amend its policy wording to state the maximum amount it will pay for smartphones.
The bottom line, and the moral of the story
Read the terms and conditions of all policies so you know before you buy what clauses will and definitely won’t suit you. Buy the cover that’s important to you and familiarise yourself with your options within that cover. No-one wants the gloss of a holiday rubbed off through a travel insurance dispute that could have been avoided.