OGC Op. No. 10-02-06
The Office of General Counsel issued the following opinion on February 23, 2010 representing the position of the New York State Insurance Department.
RE: Travel Insurance
1) In light of the Legislature’s enactment of N.Y. Ins. Law
2) To which types of groups may an authorized insurer issue a property/casualty insurance policy insuring travel risks pursuant to Insurance Law
3) What constitutes a trip for purposes of Insurance Law
4) Is trip cancellation/trip interruption an authorized kind of insurance under the New York Insurance Law?
5) What events are permissible triggers for trip cancellation/trip interruption coverage offered pursuant to Insurance Law
6) May an insurer include in its travel insurance policy a “Cancel for Any Reason Waiver” or “Change of Mind” coverage?
7) What benefits may trip cancellation/trip interruption coverage provide upon the happening of a property/casualty coverage trigger?
8) What items may be covered under “personal effects” coverage within the meaning of Insurance Law
9) May a property/casualty insurer provide coverage on an individual or a group basis pursuant to Insurance Law
1) Yes. A property/casualty policy insuring travel risks may be issued on an individual basis, provided that the coverages within the policy each come within an authorized kind of insurance as defined in Insurance Law
2) Pursuant to Insurance Law
3) Insurance Law
4) Yes. An insurer may write trip cancellation/trip interruption coverage as substantially similar to inland marine insurance pursuant to Insurance Law
5) Each triggering event (trigger) for trip cancellation/trip interruption coverage (whether as part of a group or an individual policy) must be fortuitous and must be reasonably expected to cause or lead to the cancellation or interruption of a trip, respectively, rather than some unrelated reason.
6) No. An insurer may not include “Cancel for Any Reason Waiver” or “Change of Mind” coverage in its travel insurance policies because such coverage is not insurance, nor is it necessarily or properly incidental to the kinds of insurance that an insurer is authorized to write in this state.
7) Upon the happening of a trigger for trip cancellation/trip interruption coverage, the coverage may include payment of or indemnification for any loss that may reasonably arise as a result of the cancellation or interruption of the trip.
8) Personal effects coverage within the meaning of Insurance Law
9) Yes. A property/casualty insurer may provide coverage for the loss of or damage to a vehicle that an insured rents on a trip on an individual basis. A property/casualty insurer also may provide coverage for loss or damage to a rental vehicle on a group basis if such coverage is provided pursuant to Insurance Law
This inquiry arises from travel insurance policy filings that the Department’s Property Bureau has received in the wake of the recent enactment of Insurance Law
(a) (1) A group property travel insurance policy, and certificates thereunder, may be issued or delivered in this state only in accordance with the provisions of this section.
(2) A group property travel insurance policy, and certificates thereunder, may be issued only by an authorized insurer.
(3) The policy may be issued to:
(A) any railroad company, steamship company, carrier by air, public bus carrier, or other common carrier of passengers, which shall be deemed the policyholder, where the policy insures its passengers; or
(B) any other group where the superintendent has determined in a regulation that the members are engaged in a common enterprise, or have an economic or social affinity or relationship, and that the issuance of the policy would not be contrary to the best interests of the public.
(4) The policy may provide coverage for trip cancellation, trip interruption, baggage, and personal effects when limited to a specific trip. The policy shall be sold in connection with transportation provided by the common carrier or, with respect to other groups as permitted by the superintendent in accordance with subparagraph (B) of paragraph three of this subsection, subject to such limitations provided in the regulation promulgated by the superintendent.
(5) Coverage under the policy shall be limited to the group member's risks with respect to a particular trip.
Prior to the enactment of Insurance Law
At some point, the Department became aware that some property/casualty insurers were offering travel insurance policies containing both accident and health and property coverages on a group basis. Except for certain exceptions not relevant to travel insurance, the Insurance Law proscribes an insurer from offering property coverages on a group basis. Thus, to facilitate the offering of travel insurance policies, including trip cancellation/trip interruption coverage, the Department put forth a bill that led to the enactment of Insurance Law
Although the inquirer did not ask any specific questions, the inquiry raises nine separate concerns. Each is addressed in turn.
1. Individual Policies
The query concerns whether a property/casualty policy insuring travel risks may be issued on an individual basis.
Neither Insurance Law
The Department sought the enactment of Insurance Law
2. Allowable Groups for Group Property Travel Insurance
The query concerns the types of groups to which an authorized insurer may issue a property/casualty insurance policy insuring travel risks.
By its terms, Insurance Law
3. Definition of “Trip”
The query concerns the meaning of “trip” for purposes of Insurance Law
4. Trip Cancellation/Trip Interruption: Kind of Insurance
In enacting Insurance Law
Trip cancellation/trip interruption coverage most relates to marine insurance, and specifically inland marine insurance, which is defined in Insurance Law
Although trip cancellation/trip interruption coverage does not come within the specific terms of the inland marine insurance definition set forth in § 1113(a)(20), 1 trip cancellation/trip interruption coverage and inland marine insurance are both related to travel or transportation. For instance, physical loss of or damage to baggage coverage has long been written as an inland marine coverage. Also, physical loss of or damage to bicycles and laptops are classified as inland marine insurance because they are readily portable items that are often mobile.
Moreover, an informal survey conducted by OGC found that most of the states that responded treat trip cancellation/trip interruption as a form of inland marine insurance. And, the National Association of Insurance Commissioner’s (NAIC) Matrix, which sets out uniform codes for types of insurance coverages, classifies trip cancellation/trip interruption as a form of inland marine insurance.
Thus, the appropriate and practical means for the Department to give full effect to the Legislature’s intent to allow trip cancellation/trip interruption coverage is to classify trip cancellation/trip interruption coverage as substantially similar to inland marine insurance.
For the same reasons, trip cancellation/trip interruption coverage issued on an individual basis will also be treated as if it were substantially similar to inland marine insurance. Individual travel insurance policy rates and forms will be reviewed by the Property Bureau in the same manner as it reviews group travel insurance policies. 2
5. Trip Cancellation/Trip Interruption: Triggering Events
The query concerns which events are permissible triggers for trip cancellation/trip interruption coverage under Insurance Law
Each triggering event (trigger) for trip cancellation/trip interruption coverage (whether as part of a group or an individual policy) must be fortuitous and must be reasonably expected to cause or lead to the cancellation or interruption of a trip or some part of the trip, rather than some unrelated reason. Otherwise, trip cancellation/trip insurance may be used to cover events that are not fortuitous, or that come within other kinds of insurance, including kinds that an insurer is not authorized to issue under New York law.
Generally, the following examples that the Department has observed in travel insurance policies appear to be appropriate coverages, but only to the extent that they actually prevent taking the insured trip or some part of the trip (including being unable to engage in an activity or event on the trip due to fortuitous reasons): adverse weather; strike; employment layoff or termination (or job relocation that prevents the insured from taking the trip or being required to work during the time scheduled for the trip); sickness or death or accidental injury (of a sufficiently severe nature) of an insured traveler, his or her family, or a childcare provider whose services are necessary for the insured to take the trip; carrier-caused delay; loss or stolen passports, or other travel documents; quarantine; hijacking; natural disasters; civil disorder or unrest, death of insured’s host at destination; cancellation beyond the control of the insured of an event that the insured was traveling to attend; bankruptcy and/or other default of the insured’s travel supplier, when such prevents the insured from taking the trip; the insured or traveling companions or childcare provider (where provider is needed so that insured can take the trip) being called to jury duty or to appear as a witness, or subject to other court order that prevents the insured from taking the trip, or called to active military duty; normal pregnancy or complication in pregnancy after paying for the trip in full; hotel overbooking (when it causes a trip cancellation, interruption or other loss); or childbirth of immediate family member or surrogate mother for the insured and his or her immediate family. This list is illustrative of what the Department will find acceptable and not intended to be exclusive. Also, coverage for the rental fees that the insured pays for equipment that is lost or damage on the trip may be sufficiently related to trip cancellation/trip interruption, in that such items may be needed to engage in an activity or event on the trip.
6. Cancel for Any Reason/Change of Mind Coverage
The query concerns whether an insurer may include in its travel insurance policy a “Cancel for Any Reason Waiver” or “Change of Mind” (“Change of Mind”) provision.
“Change of Mind” typically allows a traveler to cancel a trip for any reason, including events that are not fortuitous, such as personal preference. Given that this coverage is not based upon the happening of a fortuitous event within the meaning of Insurance Law § 1101, it is not insurance under the Insurance Law. And although the Insurance Law authorizes an insurer to engage in a non-insurance business only if the business is necessarily or properly incidental to the kinds of insurance that it is authorized to write in this state, see Insurance Law
7. Trip Cancellation/Trip Interruption: Benefits
The query concerns the scope of benefits that trip interruption/trip cancellation may afford upon the happening of a property/casualty coverage trigger.
An insurer may not provide coverage under a trip cancellation/trip interruption policy except for losses actually incurred by the insured that are caused by the trip cancellation or trip interruption. Acceptable benefits could reasonably include reimbursement for the following: cancellation fees for airline, train, or other common carrier travel; accommodations (including time-share cancellation charges); equipment rental, activities, or events that the insured would have used or attended during the cancelled trip; license fee refund for a license that would have been required for activities on the cancelled trip; and fees for re-depositing frequent flyer awards used for the cancelled trip.
8. Personal Effects
The query concerns the delineation of items that an insurer may cover under “personal effects” coverage within the meaning of Insurance Law
Pursuant to Insurance Law
9. Loss of or Damage to Rental Vehicle
The query concerns whether a travel insurance policy may provide coverage for loss of or damage to a vehicle that an insured rents on a trip, whether on an individual or a group basis pursuant to Insurance Law
A travel insurance policy coverage for loss of or damage to rental vehicles is duplicative of coverage already available to most insureds on an individual basis pursuant to Insurance Law
Property/casualty coverages generally may not be provided on a group basis, unless the group is one of the few specifically authorized by the Insurance Law. But Insurance
For someone who does not have a private passenger motor vehicle or group credit card, debit card or checking account policy, rental vehicle coverage is an alternative to purchasing a collision damage waiver agreement from the rental vehicle company pursuant to N.Y. Gen. Bus. Law
For further information you may contact Senior Attorney Brenda M. Gibbs at the Albany Office.
1 In addition to the provisions of Insurance Law § 1113(a)(20), which defines inland marine insurance, the Department is also guided by the 1976 NAIC Nation-Wide Marine Definition, with some exceptions not relevant to travel insurance. The Nation-Wide Marine Definition does not specifically include travel insurance policies.
2 Pursuant to § 153.6 of 11 NYCRR 153 (Regulation 135), all group policy rates and forms must be filed with the Department. Although Insurance Law § 2310(b) provides that the rates for inland marine risks that by general custom of the business are not written according to manual rates or rating plans are exempt from the filing requirement in § 2310(a), it also authorizes the Superintendent to direct insurers to file the rates for any class of inland marine insurance.