Travel Insurers Gaining An Appetite To Make Subrogated Claims Against Tour Operators

Throughout the unexpected misery that has been Covid-19, one of the long running issues for travel business’ to assess has been whether customers with cancelled holidays ought to be refunded by the tour operator, or by their travel insurers.

Generally speaking, package holidays that have been cancelled fall into one of two categories:

  1. Where tour operators are contractually obliged to offer refunds to customers, e.g. where the tour operator cancels as they are unable to provide the travel services; or
  2. Where tour operators are not contractually obliged to offer refunds to customers, e.g. where a customer cancels months in advance of the departure date.

Although those two examples are fairly straight forward, unfortunately there are inevitable a number of ‘grey areas’ which leaves tour operators and travel insurers disputing who, if anyone, is liable to issue a refund. That aside, even when insurers have paid out the customers in the first instance, there are increasing signs that insurers are gaining an appetite to try and seek a refund from the tour operator at a later date. Although insurers may be slow off the mark to make such a claim, they actually have up to 6 years from the cancellation date to bring a claim against the tour operator. Associate Solicitor at Travlaw, Nick Parkinson, explains:

A number of insurers that have paid consumers out are now using the law of ‘subrogation’ to step into the customers’ shoes and bring claims against tour operators. We have been referring to them as ‘boomerang claims’. The impression so far is that the travel insurers themselves are not sure which claims are valid, and which are not. Consequently, tour operators may receive a raft of claims from the insurers, a large number of which may have absolutely no merit! In some cases, the insurers’ lawyers will also seek legal costs. The best advice here is to make sure understand your obligations to your customers. That way you will not agree to refunds unnecessarily, nor will you spend time and costs fighting claims when you have no realistic prospects of succeeding.”

Nick has been leading in this area, and spoke to Travel Weekly back in October on this very issue

Senior Partner Matt Gatenby added:

When talking about the effect of Covid-19 on the travel industry no language is really ‘off the table’ and words like ‘decimated’ still don’t do it justice. Millions and millions has been paid out to consumers where it was right and fair to do so, and the industry would be the first to recognise that insurers also paid out similar kinds of figures. To now, at this stage, see those insurers try to claw back money from travel businesses already on the brink – well, it is startling and shows a real lack of understanding of the position the trade is in, as well as the law itself.

Fortunately, Travlaw have already acted for many travel businesses who have received subrogation claims, with more coming in all the time. We understand the issues and can provide efficient, sensible advice.

If you are a travel business that finds itself in this situation please do reach out to or for a no obligation, initial discussion.

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