Travel Insured International, Inc. and United States Fire Insurance Company face a proposed class action that claims they have failed to issue refunds for premiums paid for post-departure coverage after policyholders’ trips were canceled.
The lawsuit argues that since the defendants never assumed any risk of loss for post-departure events, such as trip interruption, medical or dental emergencies and lost, stolen or damaged baggage, upon the cancellation of a trip, policyholders should have been reimbursed for the portion of the insurance premiums they paid for the coverage. Nevertheless, Travel Insured and U.S. Fire have chosen to retain the full amount of premiums customers have paid for travel insurance, even in the event that a trip is canceled, the suit attests.
“In other words, Defendants are collecting premiums for illusory insurance coverage,” the complaint, filed in California federal court, alleges.
Travel insurance International provides reimbursement in the event of financial loss or hardship during travel, including for associated risks that occur before or after the insured’s departure date, the lawsuit explains, noting that post-departure risks can only arise after travel is underway.
Per the lawsuit, Travel Insured administers single-trip “Travel Protection Plans” that are underwritten by U.S. Fire and other insurers. Under the policies’ Schedule of Benefits, the defendants itemize each benefit provided under the particular plan, meaning the entities can “readily identify” the percentage of the gross premium attributable to each benefit, the suit avers. The case alleges the defendants can thus calculate how much each insured paid for post-departure coverage—such as trip interruption, missed connection, travel delay, medical expense/emergency evacuation, baggage and personal effects, and baggage delay coverage—for which risk was never assumed by the companies in the event the trip was canceled.
According to the case, when an insurer assumes no risk in an insurance contract, no detriment was suffered, and the insurer must return the insured’s premium. The defendants, the suit alleges, have refused to refund insureds for premiums paid for post-departure coverage in the event of a trip cancellation, even though they never assumed any risk for such covered events.
“When an insured’s trip is canceled prior to departure, Defendants are obligated to return the portion of the premium paid for coverage of risks that are only applicable post-departure,” the complaint attests. “This is because the portion of the gross premium paid in exchange for these exclusive post-departure benefits is unearned because Defendants were never at risk of having to cover the perils of actual travel.”
The plaintiff says he purchased in July 2019 a travel protection plan, included coverage for both pre- and post-departure risks, from Travel Insured to cover an October 2020 cruise for himself and his wife. After the cruise operator canceled the trip in March 2020 due to the coronavirus pandemic, the plaintiff filed a trip cancellation claim form with Travel Insured, the suit says. Per the case, Travel Insured initially failed to properly respond to the plaintiff’s claim and, only after he followed up to ask for a premium refund, offered a “worthless” voucher for insurance on future travel, which the man says is “impossible” as a result of the COVID-19 pandemic.
The suit claims the defendants’ “systematic failure” to return the allegedly unearned premium amounts for post-departure coverage is “unconscionable, unjust, and unlawful.”
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