Account of the case

While holidaying in Dubai, A was cruising on jet skis with the family. While driving, he was taking photos with the phone, until the jet ski was hit by a wave. As a result, A’s phone fell into the sea and was not found again. A claimed compensation based on their home insurance which also covered A’s luggage.

The Insurance Company issued a negative decision on the claim. According to the Company, the insurance policy compensates for the loss if it is caused by a sudden and unforeseen event. Moreover, the policy does not cover a loss caused by flooding, waves or ice movement resulting from a natural phenomenon. The Company points out at the ocean shores, occasional waves, larger than normal sea rolls, constitute usual natural phenomena. As the phone had fallen in the sea, while in use when the wave hit, the risk for its loss was so great that the loss cannot be considered unforeseen. Therefore, no compensation could be paid based on A’s insurance policy.

A sought redress of the Company’s negative decision through the Company’s internal appeal procedure. A finds that the loss event meets the conditions of suddenness and unforeseen character as per the Terms and Conditions of the Policy. A finds that the loss of the phone was caused by a single, unforeseen wave under normal circumstances and that the event could not be anticipated through usual precautions. A underlines that it was not a case of gross negligence.

Moreover, A contests the applicability of the exception related to natural phenomena, mentioned in the Insurer’s decision. According to A, the exception refers to major natural phenomena, such as significant floods or waves that cause extensive structural damage. A finds that a single sudden wave which appeared in connection with normal leisure activities cannot be paragoned with such natural phenomena.

A also finds that in the Policy Terms and Conditions, there is no definition suggesting that the use of the phone would be risky under this kind of activities. A underlines that if such losses in similar activities were excluded from the scope of coverage, they should have been unequivocally defined in the Terms and Conditions.

In the new decision on the claim, the Insurance Company stated that it has no grounds to amend its earlier decision on the claim. According to the Company, a loss at sea caused by waves is not, in objective assessment, an unforeseen event but a generally known risk. This risk also persists under still weather conditions, especially due to the waves caused by other waterborne traffic. Moreover, the losses caused by waves are expressly excluded from the insurance cover.

Customer demands and Insurance Company’s position

A is dissatisfied with the Insurance Company’s decision and demands that the Company compensate them for the loss, based on the home insurance. In the complaint, A reports that the wave was an unexpected, uncontrollable and external factor and it could not be reasonably foreseen or prevented. Therefore, A finds that the loss event meets the criteria of suddenness and unpredictability. Secondly, A finds that the exception applied in the decisions on the claim refers to extensive natural phenomena, such as floods and strong waves which cause significant damage. In A’s view, a single wave appearing during leisure activities cannot be compared with such situations. According to A, had the Insurance Company had the intention to exclude all losses related to waves, even during leisure activities, this should have been clearly shown in the Policy Terms and Conditions. A finds that this unclear Policy Term should be applied in favour of the Insured. A underlines having only used the phone momentarily and responsibly and therefore they did not act negligently.

In their response, the Insurance Company finds that in line with the Terms and Conditions, the home insurance covers losses caused by sudden and unforeseen events. However, the Policy does not cover a loss caused by natural phenomena, such as flooding, waves or ice movements. The exception covers all losses caused by waves unless it is a question of an exceptional rise of the water level, a loss caused by stormy winds or downpour, waterway or sea water floods – which have not been experienced here. The sudden and unforeseen character of the event has been assessed objectively, considering the general life experience, the exceptionality of the course of events as well as the Claimant’s possibilities to prevent the loss through normal care and anticipation.

The Insurance Company finds that the loss in question was caused by the waves raised by cruising with jet skis at sea, causing the Customer’s phone to fall in water. In objective assessment, a loss caused by waves at sea is not an unforeseen event but a generally known risk. This risk also persist under still weather conditions, especially due to the waves caused by other waterborne traffic. Moreover, the Terms and Conditions specifically exclude losses caused by waves from the insurance cover.

After the response by the Insurance Company, A sent an additional writ and, for the essential parts, repeated the motivation and grounds mentioned in the request for rehandling and complaint. A also points out that the interpretation adopted by the Insurance Company leads to a situation where all losses caused by the waves are predictable. According to A, as a consequence, the insurance cover will be void in any waterborne activities.

Contractual terms and legislation

Under Section 69 of the Insurance Contracts Act, the claimant shall provide the insurer with such documentation and information as is required for assessing the insurer's liability and as the claimant can be reasonably required to provide, with due consideration of the opportunities available to the insurer to obtain such information.

Under Para 3.1 of the applicable Home Insurance Terms and Conditions (in force as of 1 January 2024) (Protection against a sudden and unforeseen event), the Policy will cover a sudden and unforeseen, direct material damage caused by a sudden and unforeseen event.
[…]

Under Term 4 (General exceptions of insurance cover), Para 8, the policy does not cover a loss caused by flooding, waves or ice movement resulting from a natural phenomenon. This exception does not relate to damage caused by an exceptional high water level, caused by stormy winds or flood caused by downpour, waterway or seawater flooding prevailing at the place of the loss.
[…]

Recommended solution

The case relates to the question whether the dropping of the phone into the sea constitutes a property damage caused by a sudden and unforeseen event.

According to the general principles of burden of proof, the Claimant must show, in order to receive compensation, that there has been a loss compensable by the Insurance Policy. In turn, if the Insurance Company wishes to plead exceptions to limit its responsibility, it must prove that it is an event referred to in the exception.

The unforeseen character of the loss is assessed objectively on the basis of the reason for such loss, i.e., the chain of events causing the loss. “Unforeseen” characterises losses that can possibly emerge but are not expectable in such a manner that they can be defined foreseeable, based on general life experience.  In that case, it is not significant whether the event was sudden or unexpected from the Insured’s point of view.

FINE points out that taking the phone along and, especially, using it in connection with the activities described in the events, causes a generally known risk of the phone getting soaked or lost. Under ocean conditions, in particular, the waves are so normal that getting one’s possessions dropped in the water must be deemed predictable in an objective assessment. Therefore, also one larger single wave in ocean shores can be seen a normal event, even in normal weather conditions.

FINE notes that no such information has been presented in the case at hand that would suggest that the phone was dropped suddenly and in an unforeseen manner as referred to in the Terms and Conditions. FINE finds that in the case hand, no insured event compensable on the basis of the Policy has been demonstrated.

As to the exception related to waves, FINE finds that even one single larger wave is part of waves. For this part, FINE finds that the Insurance Company has demonstrated that in the case at hand, it is also a question of “waves” as referred to in the exception.                                 

Final outcome

FINE does not recommend a change in the case.

FINE
Advisory Office,  the Finnish Financial Ombudsman Bureau

Head of Division Hanén                                           
Presenting Officer Muurasniemi