Were you persuaded to buy travel insurance when you booked a recent flight or cruise?
If so, there’s a good chance you spent more than you should have and deserve to get paid back, according to federal lawsuits filed in South Florida.
The companies targeted in the suits: Carnival, Royal Caribbean and Norwegian cruise lines, and American, Delta and JetBlue airlines.
The suits follow increased scrutiny of the travel insurance industry, including an August report concluding that policies sold through third parties provide dubious value to travelers.
The lawsuits, which seek class-action status, accuse the companies of violating Florida laws by failing to disclose to consumers that they were earning “kickbacks” from travel insurance companies for every policy sold. The travel companies misled consumers by creating the impression they were merely collecting the purchase price on behalf of the insurers providing the coverage, including Nationwide (Norwegian, Carnival), Transamerica (Royal Caribbean, Norwegian, Carnival), Arch (Royal Caribbean) or Allianz (American Airlines, Delta, JetBlue).
The “kickbacks” increased the cost of the insurance to consumers beyond what they otherwise should have paid, the suits charge.
All of the suits except the one against American Airlines were filed earlier this month in the Southern District of Florida. The suit against American Airlines was halted earlier this month after the two sides announced they agreed to settle.
Of the insurers named in the suits, Transamerica, Allianz Global Assistance and Nationwide declined to comment on the ongoing litigation. A Nationwide spokesman added, “Nationwide does not participate in kickback programs relating to its insurance products, including travel insurance.” Arch did not immediately respond to a request for comment.
Travel insurance is pitched as coverage for unexpected problems that can develop, including interruption or cancellation of trips or events, loss or delay of baggage, damages to accommodations or rental vehicles, emergency evacuation, loss due to travel delays, missed connections, sickness, disability or death.
The suits against Royal Caribbean, Carnival and Norwegian were filed in U.S. District Court in Miami by the Coral Gables-based The Moskowitz Law Firm in collaboration with three other firms.
One of the attorneys, Adam Moskowitz, said the firm doesn’t yet know how much money the suits will ultimately accuse the cruise lines of collecting. That information will emerge from data turned over by the cruise lines as the suits proceed, he said.
“We’re very interested to find out how much it is, and we do believe the amount is high,” he said.
The suits against JetBlue and Delta were filed by Coral Gables-based Leon Cosgrove LLP. In September 2016, the firm filed a similar suit against American Airlines.
Following two years of “heavy” litigation, the two sides agreed on Sept. 17 to settle the matter, said Alec H. Schultz, lead attorney in the airline suits.
Both Schultz and a spokesman for American Airlines, Matt Miller, said they were not permitted to provide details of the pending settlement proposal before it is filed with the court.
Schultz also said he could not discuss “kickback” percentages discovered during the American Airlines litigation. About 8 million purchasers could be eligible for “comprehensive relief” under the pending settlement agreement, he said.
Americans spent nearly $2.8 billion on travel insurance in 2016, according to a 2017 survey by the U.S. Travel Insurance Association (USTIA). That number included 32.3 million plans purchased from USTIA member companies, the association reported.
While robust and flexible coverage is available, policies sold through websites of travel providers “often fail to provide the protection that is advertised,” concluded a report released in August by Sen. Edward J. Markey, a Massachusetts Democrat.
Markey’s staff investigated how travel insurance was marketed and sold by nine major airlines and seven online travel agencies. Costs for most policies range from 6 percent to 7.8 percent of ticket costs, depending on whether the travel is domestic or international.
The report said that of three airlines contacted by Markey staff members, each “confirmed that it receives a percentage of the premium on every policy sold, but none was willing to provide any specifics.”
The report also concluded:
Consumers are pressured to buy travel insurance while booking trips online, usually by being required to click a box opting to buy it or declining it before being allowed to complete their ticket purchase.
Travel insurance plans sold through the companies are “barebones … with little coverage and a long list of exclusions that all too frequently leave consumers stranded.”
Flexibility of policies are commonly overstated on the companies’ websites, while details of coverage limitations are buried in fine print.
Policies sold by JetBlue that purport to reimburse for trips canceled because of illness actually pay out “only if, before cancelling, a physician examines the traveler, finds the condition disabling, and recommends against travel in writing,” the report says. A traveler who cannot see a doctor before cancelling must be examined within 72 hours, “which is often logistically impossible,” the report states, adding similar requirements are commonplace in travel insurance policies.
Policies sold by five online travel agencies are advertised as the Total Protection Plan but “in fact provide limited coverage,” the report said.
One online travel agency’s Total Protection Plan won’t reimburse purchasers “if an airline cancels a flight, if unforeseen circumstances require travelers to change plans, or if a tour operator at the destination shuts down unexpectedly. “This hardly qualifies as Total Protection,” the report noted.
The suits against the airlines and cruise lines follow multistate settlement agreements signed in December 2017 and January 2018 with two large insurers: Nationwide and Transamerica. These were negotiated by the National Association of Insurance Commissioners following its investigation into conduct by the travel insurance industry. Neither company admitted wrongdoing, but Transamerica agreed to exit the travel insurance market in participating states for five years through 2022. Nationwide agreed to a series of reforms, including agreeing that any fees charged for its travel insurance will “relate directly” to an incurred charge or service provided.