The situation with Egypt. What does the insurers have to do with it

Decree No. 553, signed by the President of the Russian Federation, on a temporary ban for Russian air carriers between the Russian Federation and Egypt caused a wide response in the media. Basically, discussions relate to two points: the reasons for this decision (is the A321 catastrophe an act of terrorism?) And its consequences for citizens who are in Egypt or have tourist trips to this country in the coming days, as well as for tour operators implementing such trips.

Tourism activities are closely related to a number of types of insurance, including at the legislative level. But representatives of a number of leading insurance companies and the All-Russian Union of Insurers (BCC) unanimously stated that “political” risks are standardly excluded from property insurance contracts. Let’s try to figure out what types of insurance can be involved in a situation with a sudden suspension of air traffic with Egypt by Russia and whether insurers are a priori “exempted” from payment under such agreements.

The most obvious types of insurance that could potentially require compensation from insurers are tour operator liability insurance and the so-called trip cancellation insurance.

Travel cancellation insurance is voluntary and the conditions depend on the insurance policy of the particular insurer. But, judging by the insurance policies of several leading companies that we analyzed, the risk of a ban on departure or its analogues are simply not included in the coverage under the contract. In any case, if there is such a contract (and such contracts are infrequently concluded), it is necessary to study its terms.

The responsibility of the operator is becoming more complicated. In accordance with Article 17.4 No. 132-ФЗ “On the Basics of Tourism in the Russian Federation”, the basis for the payment of insurance compensation under a tour operator’s liability insurance contract is the established fact of the tour operator’s obligation to compensate the tourist for actual damage resulting from non-fulfillment or improper fulfillment by the tour operator of contractual obligations if this is a material violation of the terms of such an agreement.

A significant violation of the terms of an agreement on the sale of a tourist product is a violation that entails such damage to the tourist that he is largely deprived of what he was entitled to rely on when concluding the agreement.

Significant violations by the tour operator of a contract for the sale of a tourist product, in particular, include failure to fulfill obligations to provide a tourist with transportation and / or accommodation services included in a tourist product.

A tour operator legally may not fulfill obligations under a contract only in a number of cases. The most obvious of them is the recognition of the event as force majeure, which, judging by the statements of the Russian authorities in the case of temporary cancellation of flights to Egypt, will not happen, or the situation will comply with Article 451 of the Civil Code of the Russian Federation “Change and termination of the contract due to a significant change in circumstances”.

The situation around Egypt, in my opinion, corresponds to article 451 of the Civil Code of the Russian Federation, but the termination or amendment of the contract under this article is possible only in court. Article 964 of the Civil Code of the Russian Federation “Grounds for the release of the insurer from payment of insurance compensation and the insurance amount”, referred to by representatives of the insurance community, contains two points, none of which directly regulates the situation and is not an unconditional basis for the release of the insurer from liability. Paragraph 2 of the article is close in meaning, but it directly implies the action of authorities with property (seizure, confiscation or destruction by order of state authorities).

The latest clarification of the situation from the All-Russian Union of Insurers with reference to paragraph 4.2.10 of the Tour Operators Liability Insurance Rules does not seem indisputable in the context of existing judicial practice. The lack of recognition by the state of the antiterrorist nature of the presidential decree does not give grounds to argue that the damage will be compensated by the state (at least on the grounds cited in the BCC commentary). In any case, the fact of causing harm (and the amount of harm) under an agreement with the tour operator, in accordance with the insurance rules, is confirmed by a judicial act that has entered into force. If the tourist who bought the ticket is not satisfied with the compensation offered by the tour operator, he is entitled to file a claim for compensation for real damage resulting from the failure of the tour operator to fulfill obligations under the contract, to the tour operator or to the tour operator and the insurer together. The payment of insurance compensation under a tour operator’s liability insurance contract does not deprive a tourist of the right to demand compensation from a tour operator for lost profits and (or) moral harm in the manner and on the conditions provided for by the legislation of the Russian Federation.

For the final determination of the areas of responsibility and the amount of compensation, it is important what decisions the state will take, how and to whom it will provide support. According to various representatives of the tourism industry, the situation with full compensation for harm without state support will be disastrous for many, if not all tour operators involved in this area. In recent years, only the lazy did not talk about problems in the tour operator liability insurance market. The insurers providing such insurance (with rare exceptions) are simply not able to make payments on the announced amount of damage.

There are also several types of insurance to compensate for the costs of harm to life, health and property. For A321 passengers, first of all, this is compulsory carrier liability insurance, payments for which Ingosstrakh has already begun to make. Payments by this type do not depend on whether the event is recognized as a terrorist act. Accident insurance and baggage insurance are often proposed to be added to the CDM policy to the standard medical insurance. The terms of such types of insurance vary among different insurance companies and contain a fairly large number of exceptions. One of the standard exceptions is damage caused by a terrorist act. Expenses for early return by CDM contracts are standardly tied to cases of injury and illness.

It is impossible to terminate insurance protection insurance contracts concluded for a failed trip with the insurance premium refunded under standard conditions without an appropriate decision of the insurer due to clause 3 of Article 958 of the Civil Code of the Russian Federation.

According to the Association of Tour Operators of Russia (ATOR), tourists are offered three options for resolving the situation: an alternative destination, moving the trip to a later date during the year or a partial refund of the cost of the ticket. ATOR clarifies that a full refund is not possible due to the specifics of the tourism business and for legal reasons. The proposed options, in my opinion, are quite worthy for such a situation, but whether there really are legal reasons for incomplete compensation of harm is a very controversial issue.

For all the troubles of the situation, insurers are probably not exactly the side that should bear ultimate responsibility to tourists for canceled trips due to decisions made by the state. Although, due to gaps in the law and prevailing judicial practice, they may have to do so. I would not want such a decision against the background of the tragic situation to result in a series of bankruptcies of tour operators liability insurers, resulting in the absence of compensation to tourists. Absolutely in the power of insurers – and in the current situation this would be the right decision – to carry out the return of premiums on VZR policies that tourists cannot use, and to pay for obligations arising from insurance contracts, under which insured events obviously took place.

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