Will you receive a refund if you cancel your travel plans due to the Coronavirus travel restrictions?

On 13 March 2020, the Australian Department of Foreign Affairs and Trade (DFAT) issued a global travel advisory: Reconsider your need to travel (a Level 3 advisory) on its smartraveller home page based on the risk of contracting COVID-19 overseas. It is unprecedented for there to be a world-wide Level 3 travel advisory.

A few days earlier, on 11 March 2020, the World Health Organization had declared COVID-19 (Coronavirus) to be a pandemic. The last time the WHO declared a pandemic was in 2009 for (H1N1) influenza.

DFAT already has Do not travel (Level 4) advisories for China, South Korea, Iran and Italy because COVID-19 is an epidemic in those countries.

The latest travel advisory applies to all countries, including New Zealand. For most countries this represents an upgrade from the ‘safe to travel’ advisories that formerly applied.

This is the 13 March 2020 DFAT travel advisory:

We now advise all Australians to reconsider your need for overseas travel at this time.

Regardless of your destination, age or health, if your overseas travel is not essential, consider carefully whether now is the right time.

We have issued this advice for two principal reasons:

1. There may be a higher risk of contracting COVID-19 overseas. You may come in contact with more people than usual, including during long-haul flights and in crowded airports. Health care systems in some countries may come under strain and may not be as well-equipped as Australia’s or have the capacity to support foreigners. You may not have your normal support networks overseas.

2. Overseas travel has become more complex and unpredictable. Many countries are introducing entry or movement restrictions. These are changing often and quickly. Your travel plans may be disrupted. You may be placed in quarantine or denied entry to some countries, and you may need to self-quarantine on return to Australia. Think about what this might mean for your health, and your family, work or study responsibilities.

The travel advisory is a DFAT Level 3 advisory. There are 4 Levels:

Level 1 - Exercise normal safety precautions

Level 2 - Exercise a high degree of caution

Level 3 - Reconsider your need to travel

Level 4 - Do not travel

The 13 March 2020 travel advisory ends with this advice to travellers:

Contact your airline, travel agent or insurance company to discuss your travel plans and options for cancelling or postponing current bookings, or to arrange flights back to Australia.

This article explores the travellers’ rights to a refund of fares and tour prices paid if they cancel their booking with their airline, cruise line or, tour operator. It concludes that no claims are possible for lost deposits and cancellation fees under travel insurance.

Does a Level 3 advisory give the traveller the right to a refund if they cancel their overseas travel arrangements?

When a traveller books a flight, a cruise or a tour, they have the right to cancel before departure. But if they cancel, their refund will be limited, depending upon the terms and conditions which apply to the fare or the tour booked.

In response to the COVID-19 crisis, many travel providers have announced cancellation policies which are a waiver of their normal terms and conditions and apply to bookings for travel within a specified period which are affected by COVID-19 travel restrictions.

Airline cancellation policies depend upon the fare type:

• Budget airfares are usually completely non-refundable if cancelled.
• Mid-range airfares will allow some partial fare refunds.
• Fully flexible airfares will allow full fare refunds.

Waiver: Qantas and Virgin Australia have announced they will waive cancellation fees and offer travel credit and refunds to passengers whose travel plans have been impacted by travel restrictions because of the coronavirus travel restrictions.

Cruise Line cancellation policies depend upon how many days before the scheduled departure / sail date the cancellation is notified to the cruise line. To illustrate:

• If 181 days or more, a full refund of the fare.
• If 76 to 180 days, a refund of the fare less the deposit.
• If 43-75 days, a refund of 75% of the fare.
• If 15-42 days, a refund of 50% of the fare.
• If within 14 days, no refund.

Waiver: Many cruise lines have “paused/suspended” operations due to port closures and will offer rescheduled cruises. They will offer credits towards future cruises, or full refunds for cancellations up to 48 hours before departure.

Tour operator cancellation policies also depend upon how many days before the scheduled departure date the cancellation is notified. To illustrate:

• If 90 days or more, a refund of the price less the deposit.
• If 60 to 89 days, a refund of the price less a 35% cancellation charge.
• If 30 to 59 days, a refund of the price less a 50% cancellation charge.
• If 29 days or less, no refund.

Waiver: Tour operators will suspend tours due to travel restrictions and are offering a credit towards future tours.

Conclusion: A DFAT Level 3 (or Level 4) advisory does not give a traveller any right to a refund or to avoid cancellation fees. The traveller must rely on the travel provider’s waiver of their normal terms and conditions.

Does travel insurance cover cancellation fees and loss of deposits if the traveller cancels travel to a country with a level 3 advisory?

Airlines, cruise ships and tour operators include advice such as this in their terms and conditions:

You are strongly advised to take out cancellation insurance at the time of booking which will cover cancellation fees.

But how useful is that advice, if the reason for the cancellation is a Level 3 travel advisory?

Travel insurance cancellation cover is subject to policy terms and exclusions. Relevant are:

1. The event giving rise to the cancellation must be not be a ‘known risk’ or ‘foreseeable’ at the time the policy is taken out.
    
2. Cover is excluded if the cancellation is because the traveller changes their plans or has a disinclination to travel.
    
3. Cover is excluded for epidemics, pandemics, terrorism, and heightened travel risk (Levels 3 or 4)

The Australian Financial Complaints Authority (AFCA) deals with disputes under travel insurance policies. These are two determinations which deal with claims made by a traveller for their travel payments after the traveller cancelled the travel before departure because of a DFAT Level 3 advisory:

Determination Case No: 511577 The traveller cancelled their 5 day holiday to Mabul Island, Malaysia because of a DFAT Level 3 warning on smartraveller. The warning was based on an unpredictable security environment.

The travel insurance claim was rejected because the Level 3 warning was in place when the holiday was booked, and the risks and dangers associated were clearly advertised. Therefore, the risks were known – they were foreseeable and so the claim was rejected. The claim was also rejected because of the policy exclusion for change of plans or disinclination to travel.

Determination Case No: 425394 The travellers cancelled their trip to Paris due to the terrorist attacks in Paris in November 2016. The travellers booked the trip and took out travel insurance before the terrorist attacks. They cancelled after the terrorist attacks and after the DFAT Level was increased to Level 3 for travel to Paris.

Their travel insurance claim was rejected because a specific exclusion applied to cancellation cover which was: “We will not pay your claim if it is caused by an act or threat of terrorism”.
The travel insurer could also have rejected the claim because of a general exclusion which was: “Your claim arises from an advice or warning of “Reconsider your need to travel” or “Do not travel” which has been released by the Australian Government Department of Foreign Affairs and Trade or any other government or official body”.

Comment This determination is a useful precedent for cancellations due to coronavirus. This is because there is a specific exclusion applicable to cancellation cover in most travel insurance policies which is triggered when there is an “actual or likely epidemic or pandemic” (which is the same type of exclusion as an “act or threat of terrorism”). Separately, the Level 3 travel advisory triggers the “Government warning” exclusion.

Conclusion: Despite both DFAT and the travel providers advising travellers to look to cancellation cover in their travel insurance policies, there is no cover because:

• Coronavirus has been a well known risk since 23 January 2020. There has been no cancellation cover for policies taken out since that date.
   
• Cover for both cancellation and medical expenses is specifically excluded for epidemics and pandemics, and a general exclusion applies once a Level 3 travel advisory issues. This means that there is no cancellation cover for all policies no matter when they were taken out because of coronavirus.

What should travellers do?

The DFAT COVID-19 travel advisory – Reconsider your need to travel – may affect travel plans, but gives no rights to travellers to a refund if they decide to cancel travel arrangements or to make a claim under travel insurance.

Travellers need to be patient, and wait for their airline, cruise line or tour operator to announce a cancellation or rebooking policy which waives the cancellation fees. The policy should offer a postponement (with no change fee) or a full refund (if the destination bans travel or closes their ports and borders).

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