Volcanic ash: where do tour operators, travel insurers and travellers stand on compensation?

As the volcanic eruption in Iceland continues to keep aircraft on the ground, Mark Lee, head of the travel law team at London and South East law firm Penningtons Solicitors LLP, offers some advice for tour operators, travel insurers and travellers.

While tour operators are busy helping customers rearrange their travel plans, they should not be in the firing line for compensation payments, provided their terms and conditions are appropriately drafted. The holiday contract usually excludes compensation payments when a cancellation is the result of unusual or unforeseeable circumstances beyond the operators' control, as in this instance. It should also exclude liability for any consequential losses such as loss of holiday entitlement, loss of earnings, or the cost of onward flights or other transport or activity arrangements.

Consumers are best advised to check the small print of their travel insurance to see if this affords them any cover for cancellation costs and consequential losses. Unfortunately, there is no travel industry standard policy clause for these circumstances because they are so unusual. The extent of cover may not therefore be clear from the policy wording so policyholders should call their travel insurers for clarification as soon as possible.

For example, some policies only cover unused travel if the cancellation is caused by fire, theft, storm, flood or damage. Is this clause likely to encompass a cancellation caused by volcanic ash? Probably not, but each insurer will need to decide how it is to interpret its own policy wording and take into account the potential PR fallout if they reject claims unfairly.

If all else fails, the Denied Boarding Compensation Regulation (EC No 261/2004) entitles holidaymakers to claim compensation from their chosen airline if their flight is cancelled or they are denied boarding. This will include the reimbursement of the cost of the ticket within seven days or a return flight to the first point of departure or re-routing to their final destination. It will also include refreshments, meals, hotel accommodation, transport between the airport and place of accommodation, two free telephone calls, telex or fax messages, or emails. Compensation ranges from €250 for all flights of 1500 km or less; €400 for all intra-community flights of more than 1500 km, and for all other flights between 1500-3500 km; up to €600 for all other flights.

Says Mark Lee, “While this financial compensation may be of some comfort to consumers, they will still lose out if their travel insurers refuse cover for the other related losses – and nothing can properly compensate the personal value of missing a family celebration, a much awaited holiday or a critical business trip.

“In these highly unusual circumstances there are going to be some grey areas for everyone involved with the airline travel industry. Those companies with the most watertight terms and conditions, are the most likely to emerge unscathed.”