COMMENT: Cash for ash questions raised as second volcano threatens to erupt

COMMENT: Cash for ash questions raised as second volcano threatens to erupt

One of the best stories of last year – assuming you were unaffected by it – was the Eyjafjallajökull volcano in Iceland spewing out an ash cloud that closed the airways of Northern Europe for what seemed like weeks on end . Like all the best stories, it just won’t go away – in fact it gets better – again assuming you are unaffected by it.

The Travel Trade Gazette reported last week that, “Insurers could be facing a flood of payouts for ash cloud compensation after a customer won a legal battle that the disruption could be classed as weather related.”

In a really nice story, TTG’s reporter Chris Gray explained how the victory in the small claims court is set to be used by the Financial Ombudsman Service (FOS) in negotiations with insurance underwriters covering claims by hundreds of customers.

The customer, former lawyer Clive Tucker (a former lawyer!), from Devon, took his insurers, Insure and Go, who were underwritten by Europ Assistance, to Yeovil County Court after the insurers refused to pay out for his costs when he was stranded in Mexico, on the basis that the ash crisis was not a weather-related issue.

The court backed Tucker, however, and the insurer was ordered to pay a total of £1,009 ($1,627).

As TTG points out, although the small claims court does not set a legal precedent, it follows a provisional decision made by FOS in another case covering delays caused by the ash cloud where it ruled that ash should be seen as weather related.

The insurer in that case wanted to test the issue in the High Court before paying out, but it is understood that FOS may now point out that an insurer has already accepted the principle in a lower court.

An FOS spokeswoman said it had about 600 complaints from consumers on its books and hoped to make a final ruling covering them soon, pending further discussions with insurers.

For its part, the Association of British Insurers said it welcomed the prospect of a definitive legal ruling because insurance companies had taken different views over whether the ash cloud should be seen as weather related.

Other insurers are believed to be holding out for the FOS to launch a test case to settle the matter, according to reports. This would rule on whether the ash cloud, which closed British airports for six days in April last year, should be defined as a weather event – and be covered by insurance policies – or a natural disaster and be outside their remit.

The FOS better get a move on: there is more seismic rumbling coming from Iceland. According to the Daily Telegraph, geologists have detected an increased “swarm” of earthquakes around the island’s second largest volcano. Pall Einarsson, a professor of geophysics at the University of Iceland, told the country’s national TV station that the area around Bárdarbunga is showing signs of increased activity, which provides “good reason to worry”.

The last recorded eruption of Bárdarbunga was in 1910, although volcanologists believe its last big eruption occurred in 1477 when it produced a large ash and pumice fallout. It is said to dwarf the Eyjafjallajökull volcano and has already produced the largest known lava flow on earth during the past 10,000 years. Crikey.

Note: If he were still around today, longtime Bermuda resident Mark Twain (him again) might have said that “everyone complains about the weather/ash but no-one ever does anything about it”. But he would have been wrong .

Swiss Re and Munich Re this week both announced business interruption covers aimed at airlines grounded by events such as volcanic eruption or prolonged weather disruption. A press release from JLT tells us they revealed the products at a JLT conference for the aviation industry.

Proof, if any were needed, that behind every ash cloud there is a silver lining.

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