Q: With our new or higher fees for all tickets, do
we have more liability for our errors and omissions? If so, should
we obtain or increase our errors and omissions insurance?
A: In theory, charging new fees or raising
existing fees does not increase your potential liability. Courts
deem all professional advisors liable for their negligent advice
and actions, regardless of whether the advisors are paid.
In practice, however, clients are probably more likely to sue
you if they resent having had to pay fees or if they feel that they
were given bad but expensive (in their view) advice. Therefore, I
predict a significant rise in the number of lawsuits brought
against travel agencies.
The problem with errors and omissions insurance is that it does
not cover the two most common types of agency errors and
omissions.
The first occurs when the airline demands more money from the
traveler because of the agency's allegedly improper ticketing.
The second occurs when the agent erroneously quotes too low a
price (e.g., the per-person cruise price, thinking it to be the
per-cabin price), and when the problem is revealed, the client
refuses to pay more and demands a trip at the quoted price.
On behalf of travel agencies, I have fought with several
insurance companies over these issues. The insurers say that the
policies do not cover these errors and omissions because they fall
under the policy exclusion covering all cases of "failure to pay or
collect any money, for any reason."
In other words, when the agency quotes or tickets at too low a
fare, it is "failing to pay money" to the supplier or "failing to
collect money" from the traveler.
Yet another problem with all policies is that, once you have had
made the traveler whole voluntarily in order to prevent a lawsuit,
you cannot get reimbursed by the insurance company if you settled
the claim without the insurer's advance consent.
I am not saying that these insurance policies are useless and
that agencies should shun them. In some cases, they could be
lifesavers for your business. I am merely pointing out that
agencies should not have unrealistic expectations going into the
era of new and higher fees.
Mark Pestronk is a Fairfax, Va.-based attorney specializing
in travel law. He answers your questions in the Crossroads' Legal Issues Forum.