Financial Ombudsman Service provide clarification on ash-cloud cases

02 May 2011

It is now over a year since the Icelandic volcano Eyjafjallajokall erupted causing travel chaos for thousands.  An onslaught of claims to travel insurers ensued, causing insurers and policy holders alike to closely scrutinise the wording of their policies.


A major cause of dispute was whether the wind-borne ash cloud which caused the delay constituted “poor weather conditions” within the policy, a question which has recently been addressed by the Financial Ombudsman Service (FOS).


Ms B’s claim was declined by her insurers on the grounds that there was no cover under the policy for claims arising from a volcanic eruption.  Ms B complained to FOS who considered the proper interpretation of the contract, looking at the “ordinary and natural meaning of the words within the policy”.  In her provisional decision, Caroline Mitchell, Ombudsman, commented:  “The atmospheric conditions that led to the cancellation of Ms B’s flight arose, in layman’s terms, from a combination of volcanic material and wind.  Ms B, and many other complainants to the ombudsman service, told us that they believed that these unusual conditions were an example of poor weather.  That does not strike me as an unreasonable belief.”


Any ambiguity in contractual terms must be given the interpretation that is less favourable to the party who supplied the wording, on which Ms Mitchell commented: “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”.  This decision follows that in a recent case bought before Yeovil County Court which, whilst not binding in a higher Court, will no doubt influence the way FOS approaches similar complaints.


FOS declined to dismiss the complaint and instead referred the dispute to the Court as a test case.  It was not satisfied that the complaint raised a novel or important point of law, and that it would more suitably be dealt with by a Court as a test case.  Ms Mitchell found that FOS was the proper forum for the complaint to be heard.


The upshot is that the travel insurance sector will now be faced with paying what is estimated at tens of millions of pounds of claims.  Insurers will no doubt also now be reviewing their policies with a view to putting the matter beyond doubt by excluding altogether claims arising from volcanic ash.