Covid cancellation wave
The last year has seen not only how the Covid-19 pandemic has had a catastrophic effect on travel, but the UK’s exit from the European Union has been finalised. To say that 2020 and 2021 have been the years of the most significant change seen for decades would not be an understatement.
As the pandemic started to hit, travel insurance companies were flooded by a tsunami of cancellation claims. Whilst some of those could be dealt with relatively straightforwardly, in looking at the policy wording, the Package Travel and Linked Travel Arrangements Regulations 2018 (Package Travel Regulations) and European Directives with regard to air travel, notably EU261, there were many customers who had booked their travel independently. Legal queries as to whether those customers could recover monies from their travel provider rather than insurers led to myriad legal queries on contractual terms, the doctrine of force majeure, and arguments as to frustration of contract in the UK and around the world. Many had to be dealt with on a case-by-case basis. Both the UK Financial Conduct Authority and the Competition and Markets Authority (CMA) became involved in giving advice as to the effect of coronavirus on cancellation rights and refunds for consumers, and the CMA also investigated several travel companies and airlines including Teletext, lastminute.com, British Airways and Ryanair, for their approach to customers’ claims.
Frustrated contracts, frustrated customers
It was quite clear that if a package holiday was cancelled in light of Foreign, Commonwealth & Development Office (FCDO) advice against travel to the relevant country, then as set out in the Package Travel Regulations, consumers were entitled to a full refund. In other cases, it was not so clear, and consideration was given to whether a contract had been legally frustrated. Where a contract had not been frustrated, applicable pre-existing terms and conditions regarding refunds and cancellation would apply if they were fair.
The general view taken by the CMA was that businesses should treat consumers fairly and responsibly, and whilst the CMA’s involvement was very helpful, this whole area was fast moving, and it was important at all times to check not only the relevant laws affecting both the consumers and businesses, but also the contracts into which they had entered.
With the different rules now as to foreign travel, including the so-called ‘travel light system’, coupled with what other countries are requesting of UK travellers and the FCDO’s own guidance, we can foresee more arguments between insurers and their customers as to whether cover is applicable.
But many travel insurance policies themselves have changed their wording and cover, so while there may remain different interpretations as to whether claims can be made under travel insurance policies in 2021, we do not foresee the huge wave of claims there were in 2020.
And then came Brexit…
And if the pandemic was not sufficient as we ended 2020, the UK formally left the European Union (EU). This not only changed how travel could take place, but also how the law can be applied. The transition period put in place by the UK/EU Withdrawal Agreement 2020 ended at 11 p.m. on 31 December 2020. During that transition period, EU regulations relating to jurisdiction, enforcement of judgments and governing law continued to have effect, but as of 1 January 2021, those regulations no longer applied and instead, the EU/UK Trade and Co-operation Agreement took effect. That Agreement does not deal with all issues, however, and neither jurisdiction nor enforcement of judgments are regulated.
In general, the applicable law is still governed by rules known as Rome II, and after 1 January 2021, all UK law implementing EU Directives will still apply. So for example, the Package Travel Regulations remain in force post-Brexit.
However, the Directives themselves are no longer applicable in the UK, and in relation to travel, some of the most relevant Directives were the Motor Vehicle Directives. These Directives were particularly useful, as the name may suggest, where a UK citizen was the victim of a road traffic accident in Europe. The claims could be brought against a foreign motor insurer and once issued, could be served on nominated UK claims handling agents. This avoided the costly and often drawn-out process to serve those proceedings abroad. However, now it is not even a requirement for EU-based motor insurers to have a claims handling agent in the UK, and even where those insurers have retained claims handling agents in the UK, it is not possible to serve proceedings on those agents. Therefore, where an EU-based defendant is named on the claim form, permission has to be obtained from the court to serve that claim form and other documents in an EU member state.
This change of legal position led to a significant number of legal proceedings being issued and served prior to 11 p.m. on 31 December 2020.
Where an incident occurred in Europe and proceedings have not been issued, it is now no longer possible to take advantage of the regime in place prior to 31 December 2020, and claims cannot be issued in England and Wales simply relying on the Motor Directives as before.
Overall, this will certainly make it harder for injured persons to bring claims – for the most part, those claims will need to be brought directly in the European state in which the accident occurred. More obstacles to easy litigation are thus in place, including the recovery of costs, as different countries having differing rules on this. We can foresee there will be a resulting effect on the recovery of insurers’ outlay, for example, as where the victim of an accident is less likely to bring a claim and unrecoverable costs rise, then equally insurers’ outlay is less likely to be recovered.
There are additional issues for those involved in an accident where there is an untraced or uninsured driver. Usually there would be recourse to the Motor Insurance Bureau if a British resident is injured in a road traffic accident in an EU member state where the driver is uninsured or untraced, but now those claims will have to be made against the foreign equivalent body, and will have to be pursued in that foreign jurisdiction.
Cross-border legal jurisdiction
Another important change is with regards to the Lugano Convention (2007), which is an international treaty negotiated by the EU, on behalf of almost all its member states, with Iceland, Norway and Switzerland. It tries to clarify which national courts have jurisdiction in cross-border civil and commercial disputes, and it ensures that judgments taken can be enforced across borders of the signatory countries. The UK has applied to accede to the Convention as an independent member, but this requires the agreement of all signatories, and the EU has recommended that this not be agreed.
Certainly, until there is clarification on this, there will no doubt be issues in enforcing judgments and this will potentially cause significant hardship to those seeking to rely on a legal judgment.
Enforcements of judgements in EU an ongoing issue
Looking at legal challenges ahead, there will no doubt be continuing issues arising in relation to road traffic accidents in Europe and the enforcement of judgments. For 2021, there may well still be a significant number of cancellation claims and arguments as to refunds. As this article is being written, the CMA remains involved in discussions over refunds, and in May 2021, it published an open letter to all package holiday companies to remind firms of their legal obligations, including the need to ensure that refund options are clear and accessible.
There will undoubtedly be more claims arising from staycations and (perhaps more positively) consequently fewer medical payments for UK-based insurers to make thanks to the National Health Service. With regards to medical expenses abroad, the European Health Insurance Card (EHIC) has been replaced by a Global Health Insurance Card (GHIC). This may well prove to be a significant misnomer, because having the card certainly does not provide free global healthcare. This will be an issue that insurance companies have to grapple with, as well as making arrangements with hospitals and medical providers through the EU regarding costs, authorisations and payments.
We will watch this legal space with interest…