Industry Voice: Brexit and Covid pose a multitude of challenges for UK travel insurers

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Frustrated contracts, frustrated customers

It was quite clear that if a package travel was canceled in light of advice from the Foreign, Commonwealth & Development Office (FCDO) against travel to the affected country, then, as stated in the Package Travel Regulations, consumers were entitled to a full refund. In other cases it was not so clear and one wondered if a contract had been legally frustrated. Where a contract had not been frustrated, the applicable pre-existing terms and conditions regarding refunds and cancellation would apply if they were fair.

The general view taken by the CMA was that companies should treat consumers fairly and responsibly, and while the CMA’s involvement was very helpful, this whole area was changing rapidly and it was important to check at all times not only the relevant laws affecting both the consumers and businesses, but also the contracts they have entered into.

With the different rules now applicable to overseas travel, including the ‘light travel system’, coupled with what other countries are asking UK travelers to do and the FCDO’s own guidelines, we can anticipate more disputes between parties. insurers and their clients as to whether coverage is applicable.

But many travel insurance policies themselves have changed their wording and coverage, so while there may still be different interpretations as to whether claims can be made under travel insurance policies in 2021, we do not anticipate the huge wave of complaints that there has been in 2020.

And then came Brexit …

And if the pandemic was not enough at the end of 2020, the UK officially left the European Union (EU). It not only changed the way travel could take place, but also the way the law could be enforced. The transition period put in place by the UK / EU 2020 Withdrawal Agreement ended on December 31, 2020 at 11 p.m. 2021, these regulations no longer applied and instead the EU / UK Trade and Cooperation Agreement entered into force. However, this agreement does not deal with all issues, and neither the jurisdiction nor the enforcement of judgments is regulated.

In general, the applicable law is still governed by rules known as Rome II, and after January 1, 2021 all UK law implementing EU directives will still apply. So, for example, the Package Travel Regulations remain in force after Brexit.

However, the directives themselves are no longer applicable in the UK and, when it comes to travel, some of the most relevant directives were the motor vehicle directives. These guidelines were particularly useful, as the name suggests, when a British citizen was involved in a road accident in Europe. Claims could be brought against a foreign auto insurer and, once issued, could be served on designated UK claims management agents. This avoided the costly and often lengthy process of serving these procedures abroad. However, now it is no longer even mandatory for EU-based auto insurers to have a claims handling agent in the UK, and even when these insurers have retained the services of claims handling agents. claims in the United Kingdom, it is not possible to serve proceedings on these agents. Therefore, when an EU-based defendant is named on the claim form, permission must be obtained from the court to serve that claim form and other documents in an EU member state.

This change in legal situation led to the opening and service of a large number of legal proceedings before 11 p.m. on December 31, 2020.

When an incident has occurred in Europe and no proceedings have been initiated, it is no longer possible to take advantage of the regime in place before December 31, 2020, and complaints cannot be made in England. and Wales by simply relying on the automotive guidelines as before. .

All in all, this will certainly make it more difficult for injured people to lodge complaints – for the most part, these complaints will have to be brought directly to the European state in which the accident occurred. More barriers to ease of litigation are therefore in place, including cost recovery, as different countries have different rules on this. We can predict that there will be a resultant effect on the recovery of expenses from insurers, for example, because when the victim of an accident is less likely to file a claim and the sunk costs increase, the expenses of insurers are also less likely to be recovered. .

There are additional issues for those involved in an accident where there is an unlocated or uninsured driver. Usually there would be recourse to the Motor Insurance Bureau if a UK resident is injured in a road accident in an EU member state where the driver is uninsured or not located, but now these claims will have to be filed against the equivalent foreign body, and must be prosecuted in that foreign jurisdiction.

Cross-border jurisdiction

Another important change concerns the Lugano Convention (2007), which is an international treaty negotiated by the EU, on behalf of almost all of its member states, with Iceland, Norway and Switzerland. It tries to clarify which national courts are competent in cross-border civil and commercial disputes and it guarantees that judgments rendered can be enforced beyond the borders of the signatory countries. The UK has applied to join the Convention as an independent member, but this requires the agreement of all signatories, and the EU has recommended that this not be accepted.

Certainly, until there are clarifications on this matter, there will undoubtedly be problems with the execution of judgments and this will potentially cause significant difficulties for those seeking to rely on a legal judgment.

Enforcement of judgments in the EU, a permanent problem

Regarding the legal challenges ahead, there is no doubt that persistent problems will arise with regard to road accidents in Europe and the enforcement of judgments. For 2021, there may well still be a significant number of cancellation requests and arguments for refunds. At the time of writing, the CMA remains involved in discussions about refunds, and in May 2021 it issued an open letter to all package travel companies reminding companies of their legal obligations, including the need to ensure that reimbursement options are clear and accessible.

There will undoubtedly be more claims resulting from stays and (perhaps more positively) consequently less medical payments for UK based insurers to be made through the National Health Service. Regarding medical expenses abroad, the European Health Insurance Card (CEAM) has been replaced by a Global Health Insurance Card (GHIC). This could well turn out to be a significant misuse of language, as having the card certainly does not provide free global health care. This will be an issue that insurance companies will face, as well as making arrangements with hospitals and medical providers across the EU regarding costs, authorizations and payments.

We will follow this legal space with interest …

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