Do the fare rules say anything? I've seen some fare rules for tickets ex-India (revenue, though) that state that if the passenger can not get the appropriate travel docs, that the cancel fee can be waived. I think you need to provide proof of the denial. Though don't know how easy it is to get the fee waived, in practice.

I have a feeling this is a country-specific rule, which do exist from time-to-time, but it might be worth checking.

Of a bit of irony is that airlines will tell you to have your visa in place before you book travel. However, some countries require you to have proof of your travel plans in, but more importantly, out of the country before they will issue a visa. So its a bit of a catch-22.