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Default/Bankruptcy Insurance Question

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Due to the NCL SEC submission dated May 5, 2020 where they state that they may not be able to fulfill their financial obligations, I am wondering how a travel policy with Default/Bankruptcy coverage might come into play.

 

We were booked on a 74 day cruise scheduled to depart on June 14, 2020 out of NYC.  The cruise has been cancelled and we have requested a refund rather than accept FCC.  Given that we were told that the refund would take 90 days, we do not expect to see our money any time soon if at all.

 

We purchased our policy within 15 days of deposit and have increased the value as we made payments on the cruise.  We also purchased the policy prior to the COVID-19 “exclusion”.  An exclusion in the policy refers to trips cancelled due to “government regulation or prohibition” and wonder how the CDC “ NO Sail Order” may come into play if at all.


Any insight would be appreciated.

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Steve from the tripinsurancestore website answered the part about default on the Celebrity forum a while back. Let me see if I can summarize it correctly.

 

Financial default deals with third party even if that exact language may not be in your policy. In other words, if you booked directly with the cruise line, you would not be covered because it is not a third party. You would have to have booked through a travel agent, who is the second party, and the cruise line then becomes the third party. Also, the cruise line has to stop operations completely - not just suspend temporarily for financial restructuring. It does not cover second party default- the travel agent - but that is not the issue here.

 

As for the second part of your question, if government action is listed as an exclusion, then I would expect the cruise line to be responsible for compensation because they are the ones cancelling the cruise even if it is a forced action. Even if you bought it before Covid-19, the exclusion was already there and refers to any “government action or prohibition.” I would not think that the insurance company would cover such a cancellation, but I am not sure because so many things have changed as all parties try to deal with Covid-19.

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23 hours ago, Babr said:

Steve from the tripinsurancestore website answered the part about default on the Celebrity forum a while back. Let me see if I can summarize it correctly.

 

Financial default deals with third party even if that exact language may not be in your policy. In other words, if you booked directly with the cruise line, you would not be covered because it is not a third party. You would have to have booked through a travel agent, who is the second party, and the cruise line then becomes the third party. Also, the cruise line has to stop operations completely - not just suspend temporarily for financial restructuring. It does not cover second party default- the travel agent - but that is not the issue here.

 

As for the second part of your question, if government action is listed as an exclusion, then I would expect the cruise line to be responsible for compensation because they are the ones cancelling the cruise even if it is a forced action. Even if you bought it before Covid-19, the exclusion was already there and refers to any “government action or prohibition.” I would not think that the insurance company would cover such a cancellation, but I am not sure because so many things have changed as all parties try to deal with Covid-19.

Hi Babr,

 

That's a good explanation. I'm going to add to what you said:

 

Travel Insurance typically covers 3rd party Financial Default. All the policies I know do not cover you are not covered for Supplier Financial Default if you booked directly with the Travel Supplier. Financial Default usually means the Travel Supplier ceases operation.


Plans you get from the Travel Supplier probably don't cover you.


If you are unsure, ask whoever sold you the policy if you are covered.


I hope this makes sense.


Steve Dasseos

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Thanks to all for the input.

 

Just to clarify, we booked through a travel agent and purchased our travel insurance from a well known carrier (not through the cruise line or travel agent).

 

This may be a moot point, as it appears the cruise line was able to secure enough capital to sustain another 18 months of operation without any sailings, so will hang out waiting for that refund.

 

Again, thanks for your responses.

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People should be very careful going forward now with respect to purchasing insurance they hope will cover financial default where NCL is involved.  Even though they seem to have secured some funding, the 8K was filed and the statements regarding 'going concern' are out in public.  It is entirely possible that insurance companies choose to exclude NCL for policies purchased going forward as a result of the filing.

 

Buyer beware - ask questions first...don't wait until you might actually need the policy to find out what is (or isn't) covered.

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11 hours ago, msmayor said:

People should be very careful going forward now with respect to purchasing insurance they hope will cover financial default where NCL is involved.  Even though they seem to have secured some funding, the 8K was filed and the statements regarding 'going concern' are out in public.  It is entirely possible that insurance companies choose to exclude NCL for policies purchased going forward as a result of the filing.

 

Buyer beware - ask questions first...don't wait until you might actually need the policy to find out what is (or isn't) covered.

Agree

Go to the website of travel insurance company and look for their Alert page.

All companies will have this listed, but not all will call it their Alert page. It may be called something else.

 

This is what I found for Travel Guard

https://www.travelguard.com/help-center/alert-list

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Since a cruise line bankruptcy would likely be caused by COVID-19, travel insurance would not cover a loss?

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5 hours ago, JerryInIL said:

Since a cruise line bankruptcy would likely be caused by COVID-19, travel insurance would not cover a loss?

I haven't heard that argument.

Is this fact or opinion? Would like to see a link backing this up as fact for future information.

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31 minutes ago, klfrodo said:

I haven't heard that argument.

Is this fact or opinion? Would like to see a link backing this up as fact for future information.


Did not word that very well. It is a question, not a fact.

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On 7/11/2020 at 4:54 PM, JerryInIL said:

Since a cruise line bankruptcy would likely be caused by COVID-19, travel insurance would not cover a loss?

Hi JerryInIL.

 

If the reason your trip is cancelled is because the travel supplier ceased operation, then you will have to find out if your policy includes Travel Supplier Financial Default.

 

If so, is it "Third Party Travel Supplier Financial Default"? If it is 3rd party, then, did you book with the cruise line directly or via a travel agent?

 

Steve Dasseos

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Posted (edited)

Let's see- your cruise gets cancelled because of the pandemic. Then before your cruise fare can be refunded the cruise line files for bankruptcy and your refund is put in limbo. As I understand it from those two facts you would not be covered through most policies because the cruise wasn't cancelled because of the cruise line's cessation of operations. I don't even think that you get into the "third party" area at all or any other coverage questions. 

Edited by sparks1093

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4 hours ago, sparks1093 said:

Let's see- your cruise gets cancelled because of the pandemic. Then before your cruise fare can be refunded the cruise line files for bankruptcy and your refund is put in limbo. As I understand it from those two facts you would not be covered through most policies because the cruise wasn't cancelled because of the cruise line's cessation of operations. I don't even think that you get into the "third party" area at all or any other coverage questions. 

Is this fact? Or conjecture?

 

Just asking..

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1 hour ago, klfrodo said:

Is this fact? Or conjecture?

 

Just asking..

"As I understand it..." should cover it.😉

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