Matthew Ford, Head of Travel at BLM, Sarah Prager and Richard Collier, Barristers at 1 Chancery Lane, consider the future implications of the COVID-19 pandemic on travel insurance, in the second part of a two-part briefing on the issue.
With the Foreign and Commonwealth Office currently advising indefinitely against all but essential travel, some countries, including the USA, closing their borders entirely to UK travellers, and others imposing restrictions on travel, as far as the authors are aware, no travel insurer is currently offering a new policy which covers claims for Covid-19 related cancellation or curtailment, although travel insurance excluding cover for pandemics is still readily available.
Travel agents and tour operators commonly require holidaymakers to confirm that they have travel insurance when booking a holiday. However, they do not stipulate that it is necessary for any particular risks to be covered by that insurance. As a result, when the FCO guidance finally changes to allow for international travel, consumers will be free to book and take holidays, albeit uninsured for any future pandemics.
What, then, will happen in the event of another pandemic of this nature which causes disruption to international travel? As matters now stand, holidaymakers would be able to claim a refund from their airline or tour operator under the terms of Regulation 8 of the Denied Boarding Regulations (EU Regulation 261/2004) or Regulation 13 of the Package Travel and Linked Travel Arrangements Regulations 2018 respectively, but could not make a claim for cancellation or curtailment under their travel insurance. Airlines and tour operators would do well, therefore, to attempt to offload this risk by obtaining their own tailormade insurance; if this is possible.
There have been suggestions that the UK government might step in, most obviously by disapplying the provisions of the EU Denied Boarding Regulation 2004 and the Package Travel Regulations 2018. In the early stages of the pandemic the government made some encouraging noises to this effect, but these have since subsided, and there are significant obstacles in the way of this approach. When the Secretary of State for Transport was asked to make a statement on the matter in Parliamentary Questions, he replied that the government expected full refunds to be made. The authors have some sympathy for the UK government in this respect; the Denied Boarding Regulations are directly applicable European legislation, and the Package Travel Regulations implement a European Directive. To amend either so as to remove consumer protection would therefore be a breach of the UK government’s obligations under the Treaty of Rome, which are still extant in this transitional period prior to full Brexit, and would lay the government open to a Francovich challenge in the domestic courts.
The only legally permissible way to amend this legislation would be for amendments to be made at EU level, and indeed, on 29th April twelve EU member states asked the European Commission to do just that, rendering it permissible for airlines to offer time-limited vouchers instead of refunds. Interestingly the UK was not amongst the signatories to the joint letter, which was sent by Belgium, Bulgaria, Cyprus, Czech Republic, France, Greece, Ireland, Latvia, Malta, the Netherlands, Poland and Portugal. It seems that Denmark, Germany and Spain are also in favour of the proposal, meaning that if such a proposal were put to the Council, there would be sufficient support for it to be passed into law. Whether or not any such measures would gain the support of the majority of MEPs in another matter; the chair of the Transport Committee, a member of the Green Party, is no friend of the airlines, and environmental groups within Parliament insist that airlines should not receive public money unless they sign up to higher environmental taxes and lower emissions when there is a return to some kind of normality.
To add to an already complicated and delicate situation, one must also consider what happens in January 2021 when the UK will have left the EU. In theory the government will be able to legislate as it pleases without fear of a Francovich challenge. However this of course would bring UK law out of step with European law, endangering the legal harmony travel businesses and insurers need to operate most effectively and smoothly.
For now, however, in the absence of any amendment to the legislation which requires airlines and tour operators to provide full refunds in the event of cancellation, the implications of any further pandemic for the travel industry are sobering. For the time being, at least, travel insurance will not cover consumers for cancellation or curtailment, and whether the industry will be able to obtain its own insurance cover for refund claims seems dubious at best.
The travel industry is left in an invidious position: unable to contract out of consumer protection legislation, unable to insure against claims, and unable to predict when the next pandemic might strike, and from where. Similarly, insurers already reeling from this pandemic are unlikely to have any appetite, or ability, to cover the cost of another one.
In recent times the senior judiciary have taken what can only be described as a breezy approach to the availability of business insurance; see, for example, the comments of Sir Brian Leveson P in Wood v TUI  2 WLR 1051 to the effect that, “although I recognise that tour operators will complain that they are being held liable for events outside their control, there are many ways in which protection from exposure in this area can be achieved.”
It might be helpful if the UK government could comment on what some of those ways might be in this particular situation.
One possibility would require just such intercountry co-operation as the EU represents; the governments of those nations whose economies depend particularly on tourism could reach some agreement with the governments of those nations exporting tourists to them, so that confidence can be restored and the industry preserved throughout any such trading bloc. This would require a degree of flexibility on the part of those nations with a successful tour operator industry (such as the UK and Germany) on the one hand, and those nations providing the services contracted for under those holiday contracts (such as Spain and Greece), on the other. The notion of the Greek tourist board underwriting the German travel industry seems an unlikely one; but then, a year ago the notion that the FCO would be advising indefinitely against any non-essential travel seemed an unlikely one, too.
About the authors
Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade.
Richard Collier was called to the Bar in 2016. Before that, he had worked as a Judicial Assistant to Lord Justice Jackson in the Court of Appeal. In the short time he has been practising he has accumulated a wealth of experience in personal injury claims generally, with a particular emphasis on cross border and other travel related disputes.
Matthew Ford has led BLM’s travel team, which consists of over 30 lawyers across 6 offices, since 2006.
BLM advises numerous leading tour operators, insurers and brokers on various travel issues, including claims, regulatory and risk management solutions.