13 May 2010

Volcanic Ash Travel Claims – Who pays when the dust settles?

More than 150,000 Britons were stranded abroad when the eruption of the Icelandic volcano Eyjafjallajokull caused air travel chaos earlier this month. The name of the volcano may be unpronounceable, but the air passengers who were caught up in this sudden event, together with the airline industry, and those who were affected in the wider economy, may well have had their own unprintable description for it. Once they are all eventually repatriated, many air travellers are likely to find themselves caught in a tussle between airlines, tour operators, insurers and credit card companies over who should pay compensation and what should be compensated for. The small print in both the contract of carriage and any policy of travel insurance that may exist could prove to be crucial in establishing who is ultimately liable to reimburse exasperated and weary air travellers for expenses incurred abroad.

What follows is merely a summary of basic principles which, in each particular case, should be considered in conjunction with the holiday contract, together with the terms of any insurance policy. Legal advice may well be desirable and necessary, depending upon the particular circumstances of each individual case.

Travel with European Union carriers (whether from within or outside the EU)
Anyone who travels with a European Union air carrier (whether flying from within or outside the EU) has certain rights under EU law. European Regulation 261/2004 provides that airlines must support passengers if their flight is cancelled or severely delayed. In those circumstances, the Regulation entitles passengers to care and assistance, including:
  • Reimbursement within seven days of the full cost of the air ticket; or
  • Re-routing to their final destination at the earliest opportunity; or
  • Re-routing at a later date at the passenger’s convenience.
  • If a passenger has chosen to be re-routed to their final destination on the next available flight, they are also entitled to the following:

    • Meals and refreshments which reasonably relate to the waiting time (generally three meals a day);
    • Hotel accommodation where a stay of one or more nights becomes necessary;
    • Two telephone calls, telex or fax messages, or e-mails.

    The carrier is liable for the reasonable costs incurred while a passenger waits for a return flight, but indulging in 5-star luxury due to the enforced extension of a bargain break is likely to result in the passenger meeting the shortfall in cost.

    There is also an important distinction to be drawn between the “assistance”, which airlines are required to provide to stranded passengers, and “compensation”. An entitlement to the latter does not arise under the Regulation 261/2004 if a flight cancellation was “ caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken by the airline to avoid delay or cancellation.”

    Accordingly, air travellers who fall into this category are entitled to recover restitutionary losses from their airline, as set out above, but not any additional compensation for delays or cancellations due to the exceptional event of an erupting volcano. This would preclude the recovery from the carrier of, for example, any loss of income that may have been sustained.

    For those who had to fend for themselves at a hotel, with no support from their air carrier (to which they were entitled), they should be advised to retain receipts and any other documentary evidence, records of money spent, and any other transactions. A record of any conversations with airlines and hotels is also important, even if they were not contemporaneously recorded.

    The many intrepid Britons who decided not to remain in their hotel - where they were entitled to be looked after by their air carrier - but who chose instead to use hire cars, trains, taxis, buses and coaches to get to the most convenient sea-port in the hope of returning home by sea, may well be less successful in securing recompense for their additional outlay (in the absence of relevant insurance cover). The Regulation does not compel airlines to pay for passengers who make their way home by alternative means. Accordingly, anyone who could not, or would not, wait to be re-routed on the next available flight and who made their own arrangements to get home will only be entitled to the cost of the original flight ticket.

    In the chaos that ensued following the cancellation of thousands of flights, certain carriers (and tour operators) acted promptly and provided the facilities in question to those stranded abroad. One particular budget airline initially baulked at paying the costs incurred by, or on behalf, of passengers, but later relented when the application of the relevant EU Regulation was pointed out. For every account of a fraught traveller anxious to get home, there is one of a much welcome extended holiday at someone else’s expense. In effect, the Regulation has forced the airlines to insure passengers when insurance companies and governments will not. The airline industry is expected to challenge this onerous obligation in the face of very significant financial liabilities that have been incurred as a consequence of recent unprecedented events. Whether the regulators who enforced the ‘no-fly’ embargo for just under a week will also be in their sights remains to be seen.

    Travel from a non-EU airport with a non-EU carrier
    Air travellers who were proposing to travel back to the UK from outside the EU using a non-EU carrier (e.g. from the US with a Gulf State Carrier) should check the terms and conditions of their particular airline. Many will provide a refund or an alternative flight and some did provide assistance during the disruption, including meals and accommodation.

    What if a planned holiday was delayed or cancelled?
    For those prospective travellers, who were expecting to travel abroad from the UK by air during the ‘no-fly’ period with an EU air carrier, the position mirrors the entitlement of those who found themselves stuck abroad and unable to return (and who had flown with an EU carrier). In such cases, there is an entitlement to re-book the flight, or demand a full refund, where the flight was cancelled within 14 days of departure. This will almost certainly have been the case for all prospective air travellers given the sudden and unexpected nature of the event that caused flights to be cancelled.

    If a passenger has agreed to fly at a later date (rather than accept a refund), but to a different destination airport, then the air carrier must pay for a transfer to the original destination airport, or to a place nearby of choice. Furthermore, as set out above in the context of those who were stranded abroad, if a flight has been cancelled, the date of the rearranged flight should be at the convenience of the passenger, and not subject to any time limit. Neither is the carrier entitled to make any additional charge if the rearranged flight is more expensive than the original one.

    Cases under the Travel Package etc Regulations 1992
    In the case of a package holiday governed by the Travel Package etc Regulations 1992, the air carrier is obliged to pay for accommodation, meals etc and the tour operator should make all the necessary arrangements. Alternatively, if the holiday was cancelled by the tour operator, then it must make a refund.

    Will insurers assist?
    The first line of redress for an aggrieved air traveller should be against the carrier and tour operator. However, there will be many travellers who have incurred expenses that fall outside the scope of the remedies provided by the EU Regulation, particularly those who attempted to get home ‘under their own steam’, and those who flew with a non-EU carrier from outside the EU. An insurance policy may be the final refuge for attempting to recoup expenses that are irrecoverable under the Regulation.

    Certain insurers have already denied liability to pay compensation on the ground that the erupting volcano was not an insurable event, purporting to invoke an “Act of God” clause in the insurance contract. The Association of British Insurers has cast some doubt on the application of such clauses, but it is beyond the scope of this article to examine the likely outcome of a legal challenge. The ABI has suggested that a fixed sum to cover for delay and travel abandonment may nevertheless be available and some insurers have been more sympathetic. The attitude of a particular insurer will have to be judged on a case-by-case basis, but if insurance cover is in place, the insurer should be notified as soon as is practicably possible about a potential claim.

    Can a claim be made against a credit card provider?
    If flights or accommodation was at least partly paid for by credit card, a claim may be made under section 75 of the Consumer Credit Act 1974 which covers credit card users for losses sustained in respect of goods and services that are not supplied, with a value from £100 to £30,000. It may also cover consequential losses such as hotel costs and subsistence. However, the law surrounding the application of section 75 could well give rise to controversy if liability is challenged by the credit card company. Again, retaining receipts and records is essential.

    Alternative routes for making complaints
    Finally, if a claim involving cancelled air travel is incapable of being resolved with the carrier, a complaint lies to the Air Transport Users Council (AUC), which deals with grievances involving flights from UK airports. It can re-direct those cases where flights originated elsewhere in Europe to similar agencies abroad. The AUC may refer a claim to the Civil Aviation Authority (CAA), which has power to prosecute any airline that refuses to pay legitimate expenses on behalf of passengers (up to a maximum fine of £5,000 per person flying). No doubt the Association of British Travel Agents (ABTA) will already have fielded multiple inquiries from travellers anxious to establish what they may be entitled to claim for.