Travel insurance gives peace of mind – except for air travellers, where few baggage claims are paid because of travel insurance policy exclusions.

This is why.

What is the standard travel insurance cover for baggage on a flight? 

The WE WILL PAY section of the travel insurance policy provides this cover:

We will pay the repair cost or value of any Luggage and Personal Effects which is stolen or accidentally damaged or is permanently lost. When calculating the amount payable we will apply depreciation due to age, wear and tear.

Standard cover is limited to a specific overall amount. Higher premiums will specifically insure valuable items such as personal computers and cameras. 

Note: travel insurers use the term ‘luggage’ while airlines use the term ‘baggage’. They mean the same thing.

What travel insurance policy exclusions apply to baggage claims?

The WE WILL NOT PAY section of the travel insurance policy restricts the cover provided by the We will pay section.

These five policy exclusions apply to baggage on a flight:

  1. items left behind
  2. items left unsupervised/unattended in a public place
  3. valuable and electronic items stored in the cargo hold
  4. items which are fragile or brittle
  5. where the airline has paid a claim

The Financial Ombudsman Service (“FOS”), is an insurer funded dispute resolution service. It reviews claims where a travel insurer has relied on an exclusion to deny cover for baggage lost on a flight. 

The FOS decisions quoted in this article illustrate the five policy exclusions.

Policy exclusion (1) items left behind

The Policy Exclusion

WE WILL NOT PAY a claim if: The loss, theft or damage is to items left behind in any ... aircraft, ship, train, taxi or bus;

Illustration – Case number 213035

The passenger left behind their laptop computer in the overhead locker of the aircraft.

FOS said that the exclusion applied despite the passenger’s wife explanation that she had left the laptop behind on the plane by accident because she had been very ill on the flight home and was anxious to depart the plane quickly after it landed.

Policy exclusion (2) items left unsupervised/unattended in a public place

The Policy Exclusion

WE WILL NOT PAY a claim if: Luggage and Personal Effects is left unsupervised / unattended in a public place, not limited to shops, airports, hotel foyers, ... and any place accessible to the public;

[also] You are not covered if: you do not take reasonable precautions (considering the value of the items) to protect your property/personal goods;

Illustration – Case number 201799

The passenger placed a small black over shoulder bag in the seat pocket in front of their seat during a long haul flight from Dubai to Sydney. The bag contained expensive jewellery, money and personal papers, claimed to be worth $38,130.

Was the aircraft a public place? The FOS Panel considered ‘an aeroplane to be a public place similar to a theatre or a train where any member of the public is able to enter the space provided a ticket is purchased’. Therefore the unsupervised / unattended in a public place exclusion was applicable.

Did the passenger take reasonable precautions? The bag was not kept under close observation – it may have been moved around, even placed under an empty seat. The passenger’s explanation was that they were pre-occupied by their daughter’s sickness during the flight, had to go the toilet often, and had rushed to disembark. They did not observe anything suspicious to indicate the bag might have been stolen, and were not certain if the bag was left behind or stolen.

The FOS Panel concluded that the passenger had not ‘employed a high degree of vigilance to ensure the safety of very valuable goods’, such as handing the bag to the wife / husband who remained seated when going to the toilet, and so had not taken reasonable precautions. Coverage was denied.

Using the FOS Panel’s reasoning, valuable goods placed in the overhead locker, are ‘unsupervised / unattended in a public place’ and may therefore be excluded from cover.

Policy exclusion (3) valuable and electronic items stored in the cargo hold

The Policy Exclusion

WE WILL NOT PAY a claim if: Your jewellery, mobile phone, camera, video camera, computer equipment or their accessories are transported in the cargo hold of any aircraft, ship, train or bus;

Illustration – Case number 270002

The passenger checked a bag into the cargo hold at Taipai airport which contained a camera, camera lens, laptop computer and a diving computer. The bag went missing in transit to Sydney.

The travel insurer paid for a number of lost items, but denied the claim for the camera and computers, relying upon the policy exclusion for electronic goods.

FOS rejected the argument that the exclusion applies only during the time that the luggage is actually in the cargo hold. FOS said that the exclusion starts from the moment the luggage is checked-in at the check-in desk, and ends at the destination baggage carousel (when it does not arrive).

FOS adopted this commercial interpretation of the exclusion because the insurer would have wanted to exclude cover for the high risk of theft situations before the luggage was loaded in the cargo hold and after it was unloaded.

This ruling means that jewellery cameras and computers need to be carried as Cabin Baggage, because there is no cover if they are Checked Baggage.

Policy exclusion (4) items which are fragile or brittle

The Policy Exclusion

WE WILL NOT PAY a claim if: The Luggage and Personal Effects is fragile, brittle or an electronic component is broken or scratched

Illustration – Case number 213035

The passenger carried glass photo frames as Cabin Baggage.

FOS said that the exclusion applied despite the photo frames being packed very carefully in foam and cloth and placed in the overhead lockers with stickers indicating that they were fragile; and also despite the fact that it was not the passenger’s fault that the frames were broken.

Policy exclusion (5) where the airline has paid a claim for the same loss

The Policy Exclusion

WE WILL NOT PAY a claim if: You are entitled to be reimbursed by the bus line, airline, shipping line or rail authority

Illustration – Case number 216841

The airline reimbursed the passenger $463.38 for the loss of Checked Baggage. This payment was made under the airline’s Conditions of Carriage.

The passenger claimed $9,905 against the travel insurer for additional value of items lost.

FOS awarded a nominal payment of $300 (subject to any applicable excess) for the non-electronic items, taking into account the payment made by the airline, and the fact that the passengers had not provided proof of ownership of value. The claim for the electronic items was denied because of the policy exclusion.

This exclusion underlines the rule in insurance that passengers cannot make a profit – they cannot be compensated twice. If they claim compensation from the airline, then the amount they receive will be deducted from the compensation paid under the travel insurance. Also, the ‘old value’ not the ‘replacement value’ is paid, unless the item is brand new (such as duty free goods).

Three words of advice

  1. Laptops, ipads, phones, valuables and travel documents must be stowed in the seat pocket or on the tray table to have the benefit of travel insurance cover. Electronic items of lesser value may be covered if stowed in the overhead locker. Electronic items are never covered if they are checked baggage.
  2. Fragile items are always at the passenger’s risk – they are never covered by travel insurance even if securely wrapped and stowed in the overhead locker.
  3. Clothing and shoes are covered only for their depreciated value, and are worthless if purchased more than about 2 years ago. When buying clothes and shoes on a trip, keep the receipts in a safe place to prove that they are new.