Out-Law News 2 min. read

Financial ombudsman rules out test case on volcanic ash


A year after the disruption caused by the Icelandic ash cloud, the Financial Ombudsman Service (FOS) has refused to refer a travel insurance dispute to the court as a test case.

The central issue in the claim was whether delay caused by the volcanic ash plume in April 2010 was the result of "poor weather conditions" under the travel insurance of someone known in the case only as Ms B. If it was, Ms B was entitled to her insurance claim.

The insurer argued that “weather” is commonly understood to refer to atmospheric conditions relating specifically to heat, wind and water precipitation in its various forms. The mere fact that a substance was in the atmosphere was not a question of weather.

In December 2010, however, Ombudsman Caroline Mitchell reached the provisional conclusion that the wind-borne ash cloud constituted "poor weather conditions" and so Ms B's claim was covered by her policy.

But, conscious of the impact that this decision would have on other, similar cases, the ombudsman invited the insurer to make representations about whether the matter should be decided by the court as a test case.

Under this procedure, the ombudsman has a discretion to dismiss a complaint if it raises an important or novel point of law which has important consequences and it would more suitably be dealt with by a court as a test case.

The insurer argued that the case had extremely significant consequences for itself and the insurance industry because of the large number of cases brought on similar "poor weather conditions" wording and the unprecedented media coverage given to the original ash cloud event.

The ombudsman acknowledged there would be considerable public interest in the outcome, but she was not convinced the case raised an important or novel question of law.

In essence, it was a matter of interpretation of the contract. In such cases, both the ombudsman and the court take the same approach. Like the court, the ombudsman will look at the ordinary and natural meaning of the words used. If there is ambiguity in a standard-form contract, both the ombudsman and the court will interpret the term in the way that is less favourable to the party who supplied the wording.

In any event, the ombudsman did not agree that, just because there was public interest in the outcome, the matter should be heard by a court. "Ombudsmen are very experienced in considering consumer matters of interest to the public," she said.

Having concluded it was not suitable for the test case procedure, the ombudsman's final decision on the merits of the case was that Ms B was entitled to be paid her travel insurance claim.

Since her provisional decision, the ombudsmen noted that the county court had reached a similar conclusion on similar wording. But decisions in the County Court do not create legal precedent.

Stressing that she was not making a general legal ruling, she decided that it would be fair and reasonable in this case for the insurer to treat the wind-borne ash cloud as "poor weather conditions".

"I do not consider that it is stretching the ordinary meaning of the words to interpret the cloud of ash moved by the wind as an example of a poor weather condition," she said.

"I thought, and think, that consumers who are delayed by atmospheric conditions which they believe to be poor weather conditions would not unreasonably expect this to be covered by the consumer travel policy they have taken out for unexpected eventualities outside their control," she added.

The insurer argued that this would mean travel policies would have to list all potential events that were not covered by the policy. The ombudsman said that would clearly be unreasonable:

"But here the insurer has told me that the risk to travel caused by volcanic eruption has been known since Mt St Helens erupted in 1980. This dispute would not have occurred had they excluded a known risk, which they could easily have done."

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