Bloomberg Law
Nov. 25, 2020, 11:31 AM

Travelers Turn to Courts for Coverage of Virus-Scrapped Vacations

Jacob Rund
Jacob Rund

Travelers whose plans were upended by the Covid-19 pandemic are waging legal battles against large trip insurers, testing the insurance industry’s boundaries on exclusions and coverage limits.

In roughly two dozen lawsuits, cruise goers, Shakespeare festival fans, and others have accused insurers of wrongfully denying payouts for travel costs and policy premiums.

The cases are largely in the beginning stages. But a federal judicial panel’s Dec. 3 hearing on possibly consolidating some cases could shed light on when initial rulings could arrive and the legal arguments that will be in focus.

Insurers have had to fend off more than a thousand lawsuits from policyholders, ranging from universities to restaurant owners, mostly seeking payouts for Covid-related business interruption losses. The large batch also includes other disputes involving consumer policies, such as trip insurance, with billions of dollars at stake.

In 2018, Americans spent about $3.8 billion on travel protection, according to a study issued last year by the US Travel Insurance Association.

Some basic travel insurance policies bought alongside trip packages and plane tickets cover loss from a quarantine. But insurers argue that state-issued, shelter-in-place orders didn’t amount to enforced isolation, falling short of a covered quarantine in such policies.

Insurers also claim that basic policies often exclude coverage for pandemics and epidemics. That language helped one trip insurance provider get the proposed class action it’s facing tossed by a federal judge this week.

Policyholders counter that they shouldn’t be penalized for abiding by government mandates when canceling their bookings. Others saw their trips scrapped involuntarily, which they say was out of their control and should be covered.

“The basic question is, for people who bought this travel insurance, does it cover them when they couldn’t travel because of the pandemic?” said Tom Baker, a University of Pennsylvania law professor.

Covered Perils

Trip insurers facing consumer lawsuits include Travelex Insurance Services Inc., Assicurazioni Generali S.p.A., and Nationwide Mutual Insurance Co., as well as underwriters like Berkshire Hathaway Specialty Insurance Co.

These suits, brought as proposed class actions, seek coverage for trip costs and, sometimes, refunds of premiums. Some accuse insurers of bad faith contract breaches and deceptive trade practices.

In January, Mathew and Kari Nixon booked a March stay at a Panama City Beach resort, and bought standard travel insurance from a Generali affiliate.

The insurer denied their claim for the resort deposit, finding that the cancellation didn’t stem from an event covered by the policy.

The Nixons argue that their situation falls under two “covered perils” in the policy— a quarantine that barred travel, and a natural disaster that made accommodations inaccessible.

The policy defines quarantine to mean “enforced isolation to prevent the spread of the disease,” said Christopher Esbrook, of Esbrook Law LLC, who represents the Nixons. “I don’t know how much more on the nose we need to be.”

The couple also argue that Covid-19 is a natural disaster that made their hotel inaccessible.

“A virus is a naturally occurring thing,” Esbrook said. “And it is certainly a disaster.”

“What insurers are saying, basically, is ‘tough luck,’” he added.

Coverage Denied

Meanwhile, the insurance industry has seen a “significant increase” in both policyholder claims and payouts made, said Megan Cruz, executive director of the US Travel Insurance Association.

“Cancel for Any Reason” policies, typically more expensive than standard travel insurance, may have covered trips canceled voluntarily in light of the pandemic, Cruz said. But a standard policy wouldn’t provide coverage unless the travel changes were due to a specific event defined in their plans, she added.

“Policies provide coverage when an unforeseen, covered event prevents or interrupts travel,” Cruz told Bloomberg Law.

Not surprisingly, many travelers are hearing from their insurers that the pandemic doesn’t amount to such an event.

Most standard travel insurance policies have an exclusion for epidemics or pandemics, said Mark Friedlander, corporate communications director at the Insurance Information Institute, an industry group.

The exclusion kicks in once the World Health Organization and the Centers for Disease Control declare an epidemic or a pandemic, he said. Insurers began pegging Covid-19 as a “known event” in January — a fact cited as a defense in some lawsuits for denial of coverage.

Such exclusions track with the placement of similar language in business interruption policies following the SARs outbreak, he said.

“This isn’t something that someone in the insurance decided ‘Oh, we better put this in now,’” he said. “Unfortunately, it appears that many travelers weren’t aware of it until Covid-19 occurred.”

On Nov. 24, a Missouri federal judge found that Jefferson Insurance Co. and Allianz Global Assistance weren’t on the hook for the costs of a traveler’s canceled trip.

According to the ruling, the trip insurance policy at issue excluded coverage for loss resulting from an epidemic. And because the cancellation occurred as a direct result of Covid-19, no coverage exists, the judge held.

But not all travel insurance policies being disputed have those exclusions, including those offered by Generali. And that could trigger different defense tactics from insurers.

In the Nixons’ case, Generali argues that a governor’s order limiting non-essential travel didn’t impose a true “quarantine.” Generali also alleges that the Nixons’ accommodations weren’t inaccessible since they could have ventured to the resort as planned.

The Nixons canceled their trip “at least several days” before the Illinois governor issued the order, Generali said in court filings. And, it claimed, the Covid-19 pandemic doesn’t amount to a fire, flood, or similar natural disaster.

“English, like every other language, is not precise,” said Baker of the University of Pennsylvania. “So there’s going to be room for people to make arguments about why a policy does or doesn’t offer coverage.”

Consolidating Cases

The Judicial Panel on Multidistrict Litigation’s hearing next week will determine if a dozen travel insurance lawsuits against Generali should be consolidated, with one judge overseeing them.

In August, plaintiff Tralisa Sheridan asked the panel to transfer eight of the cases to the U.S. District Court for the Eastern District of Texas because they “involve almost identical factual allegations” and share common legal questions.

Other plaintiffs against Generali are asking for consolidation in the U.S. District Court for the Western District of Pennsylvania.

Generali, as well as the Nixons, opposes multidistrict litigation (MDL). Calls for an MDL are merely “gamesmanship,” the insurer said in its written brief.

The JPML looks for common questions of fact and potential efficiency, which Generali says don’t exist in their cases.

But the panel’s recent consideration of the pandemic-related insurance lawsuits suggests consolidation could be in the cards, Baker said.

The JPML declined to consolidate hundreds of business interruption cases earlier this year. The panel did, however, create three consolidated proceedings —each grouping involved cases brought against a single insurer.

“The Generali lawsuits have a lot in common with all three of those,” Baker said. “So if I was betting, I’d give good odds on this MDL being approved.”

To contact the reporter on this story: Jacob Rund in Washington at

To contact the editors responsible for this story: Roger Yu at, Melissa B. Robinson at