Q: Most major cruise lines refuse to pay commissions on shore excursions, so we are tempted to sell the excursions of third-party providers, all of which pay excellent commissions. If we recommend or endorse such a land operator, could our agency be liable if there were a bus crash or if the excursion did not get back to the ship on time? If so, what can we do to prevent such liability?
A: Selling third-party shore excursions is a good way to generate new revenue. As Charlie Funk wrote in his March 29 column [It's Like This: "What business of it is yours, anyway?"], "It's time to ... begin to profit from these revenue streams as well. We need to sell third-party products to improve our margins, just as the cruise lines do."
However, you need to be careful, as clients who suffer losses might be unable to sue a distant land operator and might try to sue your agency. Aggressive personal-injury lawyers will try to pin liability on you under various legal theories.
Although the general legal rule is that agencies are not liable for operators' acts or omissions, including accidents and delays, there are three exceptions under which such lawsuits might be successful.
• First, if you do not disclose the identity of the operator before the sale is closed, the law says that you stand in the shoes of the operator and can therefore be held liable for anything the operator does or fails to do. This is called the rule of "undisclosed principal," and it applies to every supplier relationship that you have.
So be sure to disclose the identity of the operator in writing at the time you make the sale. Add the name to the itinerary that you produce and send it to the client, and make clear that the named operator is providing the shore excursion.
• Second, agencies are liable for their own negligence. The word "negligence" means the breach of a duty of care that the courts have recognized. The courts have held that agencies are liable for negligence if they fail to disclose "reasonably obtainable relevant information" about the operator or destination, if that information would not be known to the general public.
In the case of shore excursions, you need to inform the client, preferably in writing, about any problems with the operator that you have read or heard about in the recent past, such as a delay that caused passengers to miss the ship or complaints about the safety, comfort and enjoyment of the excursions.
• Third, your agency could be held liable for your agent's misrepresentation in selling the excursion if the agent made a false statement that induced the client to sign up.
For example, if you state that the operator can accommodate wheelchair-bound passengers when it cannot, the client could successfully sue for a refund or the cost of a suitable replacement tour.
The best way to prevent such suits is to have your cruise clients sign a disclaimer (such as those found at www.pestronk.com/free.html) stating that you are not responsible for the acts or omissions of any suppliers. Although disclaimers do not absolve you of liability for negligence or misrepresentation, they are very effective at deterring clients from filing lawsuits in the first place.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].