Q: When our agents answer client questions about what travel accident or cancellation insurance does or does not cover, they often make mistakes, usually assuring the client that an occurrence would be covered when the opposite is true. As a result, we sometimes get blamed and even sued when a client suffers a loss that the agent erroneously claimed to be covered. We have instructed our employees never to answer coverage questions but instead to refer the client to the insurance agency's website. However, this instruction is impractical because agents have to answer at least some questions about the insurance in order to sell travel. What else can we do to protect ourselves against these kinds of claims?
A: You can add an appropriate clause to your disclaimer that you should be using for all leisure trips, such as those at www.pestronk.com/free.html. I cannot guarantee that every court will uphold the clause, but you will at least deter most claims that you misrepresented the insurance policy.
As you know from purchasing car or homeowner insurance, oral statements by insurance agents that your coverage is in effect can be binding on the insurer. Most courts also hold that the insurance agent's description of the details of the policy binds the insurer, as well, even if the written policy does not match what the insurance agent said.
The general rule has been stated by a court as follows: "In the absence of fraud on the part of insured and the agent, an insurance company is bound by all acts, contracts or representations of its agent, whether general or special, which are within the scope of his real or apparent authority, notwithstanding they are in violation of private instructions or limitations on his authority, of which the person dealing with him, acting in good faith has neither actual nor constructive knowledge."
So if you are authorized to sell travel insurance, and if you erroneously state that an occurrence or pre-existing condition would be covered, and if the client relies on your statement in deciding whether to go ahead with both the trip and the insurance purchase, a court may well hold your agency liable for any loss that the client sustained, such as cancellation fees and medical expenses.
However, if at the time that you made these oral representations, the client agreed to a statement acknowledging that no oral description of the policy would be binding, your descriptions would arguably have no legal effect, unless you intentionally tried to mislead the client. Since you should be requiring a disclaimer in all cases where you offer travel insurance anyway, you can add an appropriate clause to that disclaimer.
The clause could state, "For your protection, we strongly recommend that you purchase trip cancellation and travel accident insurance. However, no representation or description of the insurance made by our staff constitutes a binding assurance or promise about the insurance."
To bind the client, you could require a signature, or you could post the disclaimer on your website as long as the client has to click "I Agree." You could also just include the disclaimer on the itinerary that you email, as long as you can prove that the client received the email, such as a reply message from the client.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].