Months and months ago you planned a wonderful vacation to Italy, or you scheduled an important business trip to Spain, or a cruise around the Greek Isles, or a shopping trip to New York, or a college assessment in California, or a trip to Disney World. When you made your reservations, you noticed a “strong suggestion” that you purchase travel insurance to “protect your trip” in case anything happened before or during the excursion. Being a prudent traveler, you bought the coverage, hoping it would not be needed.
Unbeknownst to most of us, COVID-19 was slowly, but surely, circling the globe. Soon COVID-19 morphed into a pandemic and everything worldwide began to grind to a screeching halt. Shelter-in-home orders, business closings, hospitals filling up, etc., etc., etc. But what about your long-planned trip? You bought the trip insurance as suggested. Certainly, it will cover the money you lost by having to cancel. Will it? Maybe or maybe not.
Insureds are generally required to be familiar with the contents of their insurance policy. This essentially means an insured is deemed to have read the policy and, therefore, be familiar with its terms, conditions, and limitations. Unfortunately, this only rarely occurs as most people fail to review the policy until after there is a reason to do so. After all, insurance policies are long and contain unfamiliar terms. However, now you have a loss and need to make a claim. Whether you read your policy before or after this loss, if the terms, conditions, and exclusions are unclear, feel free to contact one of the attorneys from Butler Snow LLP for assistance, policy evaluation, and coverage recommendations.
Insurance companies write insurance coverage based upon an anticipated level of risk for each covered peril. Coverage is provided for unanticipated and/or unforeseen losses. Understandably, insurance companies normally do not write coverage for a risk which they know will assuredly result in many, many claims – especially when those multiple claims are broadly located, are not confined to a small region or area, and constitute a “known event”. For this reason, insurance carriers providing travel insurance began, as of 22 January 2020, to specifically exclude coverage for COVID-19 related losses since it had become a “known event”. If coverage was bought before that time, there might be coverage for COVID-19 losses, but the chances are still likely minimal. Choice, Australia’s leading independent and member-funded consumer advocacy group, published a list of insurers around the world which, as of 18 March 2020, either specifically provided or specifically declined to provide insurance coverage for losses attributed to the COVID-19 virus and its global-wide aftermath. (https://www.choice.com.au/travel/money/travel-insurance/articles/travel-insurance-pandemic#which-insurers-cover-you-for-an-epidemic-or-pandemic).
Due to past outbreaks (i.e.; Swine flu, Ebola, SARS, MERS, etc.), most standard travel insurance policies already typically exclude coverage for losses caused by viral eruptions, epidemics, and/or pandemics. Moreover, no travel insurance provides coverage for losses when an insured cancels a trip due to his or her “fear of travel”. Fortunately, among other things, multiple airline flight cancellations, cruise ship travel suspensions, “shelter-in-place” orders, curfews, and business closings all have justified travelers’ needs to cancel scheduled trips.
Like many types of insurance policies, travel insurance or trip insurance, is what is commonly referred to as “named peril” coverage. This means that the insurance policy provides coverage of those causes of loss which are specifically set forth in the policy. The converse being, if it’s not a “named peril” in the policy then it’s not covered. Kasara Barto, a spokesperson for the travel insurance comparison site Squaremouth, addressing travel coverage in general and quoted by Chloe Foussianes, in an online article from www.townandcountrymag.com (11 March 2020), noted that:
[T]ravel insurance policies are designed to cover ‘unforeseen losses incurred while traveling’ including a wide range of things, from lost luggage to the cost of meals and accommodation during an unexpected delay. Trip cancellation coverage is also typically included, with most policies offering to reimburse 100% of a customer’s prepaid and non-refundable expenses – if the reason for cancellation is on a policy’s approved list. ‘The most common covered reasons are an illness, injury, or death of the traveler, a traveling companion, or a family member,’ adding that inclement weather, terrorism, and natural disasters are also frequently covered.
There are basically two types of trip insurance – so-called standard travel insurance and Cancel For Any Reason (“CFAR”) coverage. Standard travel insurance, subject to various exclusions, qualifiers, and contingencies, will generally cover, among other things, flight delays, emergency medical treatment, emergency medical evacuation, medical emergencies, trip cancellation, trip interruption and/or delay, emergency lodging, lost and/or stolen luggage, and accidental death/dismemberment. CAFR coverage, albeit likely costing at least twice the premium of standard travel insurance policies, covers all of those potential claims and does so for any reason at all. Both types have various restrictions and limitations. CFAR coverage is generally not a stand-alone policy but is usually added to standard coverage policies as an upgrade to the normal standard coverage. CFAR must insure the entire cost of the trip and be purchased within 14-21 days after making the original booking payment. Most standard travel policies cover up to 100% of costs associated with losses from one or more named perils. CFAR coverage only pays between 50% to 75% of the trip’s cost since CFAR is insuring a much broader scope. CFAR generally restricts coverage to a trip cancellation not less than 48 hours prior to the scheduled departure.
While certain policy language may provide limited coverage under specific circumstances notwithstanding a designated limitation, some of the most common policy exclusions to coverage are:
- Known, foreseeable, intended, or expected losses;
- Pre-existing medical conditions (unless waived);
- Intentional self-harm and attempted/successful suicide;
- Mental, nervous, or psychological disorder;
- Alcohol and/or drug abuse;
- Participating in or training for a professional or amateur sporting competition;
- Participating in extreme, high risk sports and activities (e.; skydiving, bungee jumping, hang gliding, free climbing, personal fighting sports, etc.);
- Criminal acts (often limited to felonies);
- Air, water, or other pollution;
- Nuclear reaction, radiation, or radioactive contamination;
- War, riot, or civil insurrection;
- Public authority travel prohibitions; and
- Travel supplier’s complete cessation of operations.
While most travel insurance policies use similar terms and contain similar exclusions, each travel insurance policy is different in its own way. There may be some exceptions to coverage exclusions in one which are absent in another. Shop around, compare. If you don’t understand, as noted before, contact your attorney or an insurance attorney for help. That assistance may, and likely will, prove invaluable. Nevertheless, when it comes to travel insurance coverage for losses and/or trip cancellations due to the COVID-19 pandemic there is likely little to no coverage available, especially after 22 January 2020, unless you have or intend to purchase CFAR coverage. Be mindful that CFAR coverage, assuming the addition of no COVID-19 exclusions, is still limited to between 50% and 75% of the trip’s cost.
As an aside, given the width and breadth of the COVID-19 pandemic, the legislatures and/or Departments of Insurance of individual states may impose restrictions on the ability of insurance carriers to deny coverage for these types of claims. Court cases, some of which have already been filed, may interpret policies in such a manner as to grant coverage where the insurer “intended” none to be provided. Additionally, insurers, fearing widespread public and private backlash, may “voluntarily” waive exclusions and provide insurance coverage, at least for the foreseeable future. Only time will tell.
In any case, this will be a much-disputed and much-litigated area of the law. Given the reasonably minimal losses which might predominate for individuals and businesses on a per-trip basis, it is virtually assured that class actions will occupy center stage on the litigation front.