14
Apr
20
Articles, Travel & Cross Border Claims
The Weekly Roundup: the Continuing Impact of Covid-19 on the Travel Industry

This week has seen more claims arising out of the Covid-19 outbreak, and more concerns about who is going to foot the bill for holiday refunds. The team at 1 Chancery Lane have summarised some of the latest developments.

Coronavirus hits travel insurers

The Association of British Insurers (“ABI”) has calculated that travel insurers in the UK could face at least £275 million of claims owing to Coronavirus, for holidays and trips that could not be fulfilled because of cancellations or general travel restrictions. To put this into perspective the Eyjafjallajökull volcanic eruption in Iceland in 2010 resulted in a mere £62 million of payments, a record at that time. Insurers have scrambled to mount a counter-offensive, by inserting Coronavirus related exclusions in new policies or even withdrawing product lines altogether such as income protection and travel insurance.

In one sense this is unsurprising and natural. Of course travel insurers are facing a raft of claims on their travel policies, and given the scale of the corona-chaos it is not overly shocking to see sums of the kind described above. The insurance industry acts as a shock absorber for us all in times like these, dampening the sharp edge of the blow dealt to individuals and businesses alike. There is no immediate need to worry about insurers’ ability to meet liabilities, as they are required to have a minimum resting solvency rate of 100% for this very occasion. Finally, before you shed too many tears for the poor old insurers, remember they have fairly considerable reinsurance policies of their own to spread the damage.

That said, call me cautious but I am inherently dubious of any mentality which smacks of “don’t worry about X [large institution], they’re too big to fail”. Memories of banking collapses in 2008 are still too fresh. Travel insurers, much like airlines, will have – one imagines – not predicted a shock quite this large and long. I am very concerned by the news that products are being taken off the market. Will this be a purely short term response to a freak aberration, or will it cause a longer term redefinition of product lines and insurer appetite for travel related risk? If the latter, this is sinister indeed. The availability of insurance to cover risks encourages consumers to make large purchases and is the cornerstone of entrepreneurialism (alongside, for example, the legal construct of the company).

Putting to one side my enjoyable though wholly unqualified ‘amateur economist’ hat, and approaching it as a travel litigator, I wonder whether there will be litigation flowing from attempts to avoid paying out, with close attention paid to the precise wording of policies. This could be in much the same vein as the five prominent Canadian airlines who might be – as has been suggested, albeit not formally – seeking to defend a recently pitched class action (concerning the extent of cancellation refunds owed contractually) on the basis that force majeure clauses are engaged.

About the author

One of the more junior members of the team, 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. He is now instructed by solicitors for both Claimants and Defendants in cross border disputes, package travel and other related claims.


Coronavirus hits taxpayers

The collapse of Thomas Cook in September last year left the Air Travel Organiser’s Licence scheme (Atol) to pick up the bill for compensating hundreds of thousands of customers. The event left a £500 million dent (approximately) in the scheme’s pocket (possibly exceeding the £570 million in assets and insurance available to the scheme through its parent fund, the Air Travel Trust Fund). Once Atol’s available assets and coverage are exhausted, the UK government must step in to meet any outstanding liability.

Readers will be well aware of tour operators’ obligations under Regulation 13 of the Package Travel, Package Holidays and Package Tours Regulations 1992 (and now Regulation 13 of the Package Travel and Linked Travel Arrangements Regulations 2018) to refund holidaymakers’ money where a package holiday is cancelled. There are good arguments in relation to the applicability of the former, earlier legislation in the current situation, because no refund is due where the package is cancelled by reason of unusual and unforeseeable circumstances beyond the control of the tour operator, the consequences of which could not have been avoided even if all due care had been exercised. Arguably a global pandemic would satisfy even the most consumer-friendly reading of this provision. However, the later Regulations, which apply to holidays booked after 1st July 2018, contain no such defence. Indeed, Regulation 14 goes further, and provides for a full refund to be provided to the traveller no later than 14 days after termination of the contract. It is this provision which is causing so much consternation within the industry.

A number of travel firms have already reportedly declined to provide refunds to customers for cancelled trips, instead offering vouchers or alternative dates. There is concern within the industry that the compensation bill for the pandemic could push a number of firms into insolvency, precipitating a call on the taxpayer to meet the inevitable Atol shortfall. This prospect, coupled with the accompanying loss of jobs and otherwise-viable businesses, has prompted calls for legislative change so as to allow tour operators longer than the current 14 days from cancellation in which to refund customers’ money in full. Proposals include extending this refund period to months, or allowing travel firms to issue credit notes. The difficulty with these proposals is that is that the underlying EU directive (which continues to bind the UK, despite Brexit) requires that the UK ensure travellers are entitled to appropriate compensation from organisers and that such compensation shall be made without undue delay. Some European member states have already legislated to provide tour operators and other retailers with the choice of providing a refund or credit note, but it is difficult to square any legislation allowing the industry to provide credit notes instead of refunds with the states’ obligations under the underlying Directive.

The World Travel and Tourism Council is predicting that the industry could shrink by 25% in 2020, with the loss of 50 million jobs worldwide, and small and medium sized companies in particular simply do not have the cash available to refund the thousands of cancelled holidays currently caught in legal limbo.

The government could conceivably intervene to financially support the travel industry, as it has done more broadly in providing unprecedented financial support to most industries and workers disrupted by the pandemic (with the tragic and lamentable exception of many self-employed barristers, it must be noted). But whether the state bails out travel firms before insolvency, or waits to bail out the Atol scheme after widespread insolvencies in the industry, it appears inevitable that the state, and not travellers, will ultimately be bearing the cost of much of the compensation that is now due to travellers under the Regulations.

About the author

Called in 2011, prior to pupillage Conor Kennedy spent two years working with a leading insurance law firm, gaining experience across regulatory, employment, leisure, travel and public sector teams. He has a varied civil practice and is accredited for Direct Access instruction, but has a particular interest and expertise in claims involving fundamental dishonesty.


Coronavirus hits cruise operators

In a series of developments which has struck fear into the hearts of even the toughest of cruise operators, causing them to whimper and look nervously over their shoulders in the perilous Darwinian waterways of the post-Covid travel industry, the past month has seen reports of three actual or potential class action suits:

The actions

1) Miami

A class action suit has reportedly been filed in the US District Court in Miami against Costa Cruises. The complaint is that the operator was negligent for allowing its ship the Costa Luminosa to set sail – and to continue its voyage – despite passengers showing symptoms of Covid-19.

The voyage in question departed on 5th March 2020, despite a man on the ship’s antecedent trip having been removed on 29th March due to heart problems (and eventually testing positive for Covid-19). After its departure on 5th March, a woman from Italy had to leave the ship on 8th March at Puerto Rico because of breathing issues (later testing positive for Covid). The complaint is that the trip should have ended that day in Puerto Rico, or alternatively returned straight home. Similarly, it is suggested that if the passengers had been told of the risk they would have fled in Puerto Rico. Instead the show continued, and after the ship was not allowed to stop at its next scheduled port in Antigua on 9th March it proceeded to sail across the Atlantic for seven days with passengers effectively trapped. These passengers were not isolated in their rooms until 15th March, the day after the ship learned that the Italian lady who disembarked in Puerto Rico had tested positive. The rest of the passengers eventually disembarked in France where 36 people tested positive.

2) California

An American couple have reportedly sued Princess Cruises for $1 million for the operator’s – they say – gross negligence in handling customers’ exposure to coronavirus on its ship the Grand Princess.

There had been a considerable outbreak on the ship during an earlier voyage, which allegedly should have caused the operator to take extra precautions with new passengers. Most importantly, given their knowledge of prior instances of infection on-board and thus exposure of the crew to the virus, the operator should have implemented proper screening protocols. There was also an abject failure to adequately alert them of the risks, indeed they say that had they known of the extent of the exposure they would not have boarded the ship.

3) Australia

An Australian law firm has reportedly been considering a different class action, also against Princess Cruises, in respect of the Ruby Princess cruise ship and specifically the 400 passengers who disembarked on 19th March who contracted the disease. The action could extent to the authorities who were responsible for handling these passengers after they disembarked. There has been suggestion that the health and border authorities were misled by the cruise ship staff. The matter is also being investigated by the New South Wales police. An altogether unhappy affair.

 Analysis

I’m a big believer in bullet points, and thus far have patiently abstained…..so without further ado:

  • When considering questions of culpability and negligence, will cruise operators be judged against the standard of – as is the test in England and Wales for professional negligence – a ‘reasonable cruise operator’? Will the reasonable standard be determined by reference to how the cruise industry as a whole was acting at the time? Or could they be deemed at fault even if they conformed with contemporaneous cruise industry ‘standards’/behaviour, on the basis that the industry as a whole mismanaged the crisis?
  • Given the absolute media frenzy surrounding coronavirus, how would a court be able to geo-chronologically determine what individuals and businesses would, and should, have been aware of? For example what level of understanding of the symptoms of the illness would operators be expected to have had in say March, or mid-March, or early April? Could judges take the attitude of “you simply can’t NOT have known about it, everyone did!”?
  • Factually the cases will turn heavily on the precise dates when operators became aware of things (provided they were reasonably diligent in making themselves aware of developments), most importantly when previous passengers had positively tested for the virus.
  • Princess Cruises, the operator in the Californian and Australian actions described above, will be even more nervous as it will fear a similar action arising out its – heavily criticised – handling of a similar situation on the Diamond Princess (involving several deaths and over 700 infections).
  • It will be particularly interesting in the Australian action to observe the possible claim against the authorities dealing with the dissemination of passengers post-disembarkation. This could surely lead to drastic extensions, or surprisingly cautious consolidations, of public liability law.
  • Without wanting to sound too nerdy, I’m genuinely intrigued to see how these cases develop and how such actions are handled in different jurisdictions worldwide. I wonder whether in England and Wales these fateful Corona-times will stimulate big changes and developments in the law. There will certainly be plenty of reported cases. It’s a fascinating, but worrying, time to be a travel litigator.

About the author

One of the more junior members of the team, 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. He is now instructed by solicitors for both Claimants and Defendants in cross border disputes, package travel and other related claims.


…and finally…

An island to the south of South Korea is suing a pair of tourists for going there on holiday when they ought to have been in quarantine. Jeju Island, which is a popular holiday destination for South Koreans, was visited by the mother and daughter on 20th March, despite the daughter having just returned from Boston, USA, and having been advised to remain in quarantine and not to travel. On 21st March the daughter began to experience symptoms of Covid-19, but the pair remained on the island for a further four days, before returning home to Seoul. During that time they came into contact with an estimated 47 people at 20 different locations. On their return they tested positive for the virus, and as a consequence it was necessary for those with whom they had come into contact to self-isolate, and for a number of businesses to close.

The proceedings have been brought by the Province of Jeju, by some of the residents who have had to be quarantined, and by two businesses which closed due to potential contamination by the women. The Claimants base their cause of action on the younger woman’s failure ‘to uphold her duty as a member of the community’, and on her mother’s active encouragement of the holiday.

Food for thought.

As the number of Claimants in the group action against the Tyrolean resort of Ischgl (about which we briefed last week) passes 2,500, could the South Koreans be onto something? If a Patient Zero can be identified for an outbreak aboard a cruise ship or in a particular hotel, such as the H-10 Costa Adeje Palace hotel in Tenerife, could proceedings seeking damages be brought by the cruise operator or hotel owner? In the author’s view they could, provided the person in question had reason to believe that he or she was unwell, but did not take reasonable steps to prevent the spread of infection. If any enterprising UK cruise or tour operators do take this step, readers of the 1 Chancery Lane Travel Briefing will of course be the first to know, although it would seem unlikely that the British tabloids would allow any such proceedings to go unpublicised.

About the author

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.

Written by or involving: Sarah Prager, Conor Kennedy, Richard Collier

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