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

Questions Presented:

1) In light of the Legislature’s enactment of N.Y. Ins. Law § 3452 (McKinney 2007), may a property/casualty policy insuring travel risks be issued on an individual basis?

2) To which types of groups may an authorized insurer issue a property/casualty insurance policy insuring travel risks pursuant to Insurance Law § 3452?

3) What constitutes a trip for purposes of Insurance Law § 3452?

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 § 3452?

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 § 3452?

9) May a property/casualty insurer provide coverage on an individual or a group basis pursuant to Insurance Law § 3452 for the loss of or damage to a vehicle that a traveler rents for use on a trip?

Conclusions:

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 § 1113.

2) Pursuant to Insurance Law § 3452(a)(3), an authorized insurer may issue a group property travel insurance policy to 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. An authorized insurer also may issue a group property travel insurance policy to 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 issuance of the policy would not be contrary to the best interests of the public.

3) Insurance Law § 3452 does not define the term “trip.” But by its ordinary and accepted meaning, in relation to travel insurance, a trip is a journey for the purpose of pleasure, business or education, or meeting other personal needs that is temporary as opposed to long term, and is a special excursion as opposed to a routine event, such as a shopping trip or regular commute to work.

4) Yes. An insurer may write trip cancellation/trip interruption coverage as substantially similar to inland marine insurance pursuant to Insurance Law § 1113(a)(32).

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 § 3452 may cover physical loss of or damage to moveable property owned by the insured that the insured carries or brings on the trip.

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 § 3442. Insurance Law § 3452 does not authorize an insurer to provide rental vehicle coverage on a group basis.

Facts:

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 § 3452. The inquirer’s client is one of the insurers that has made such a filing with the Department. Section 3452, which became effective on October 19, 2008, authorizes group property travel insurance policies. It reads in pertinent part as follows:

(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 § 3452, an insurer typically would file its travel insurance policies with the Property Bureau, which accepted the non-health provisions of the policies for filing without review as inland marine insurance. Some of these policies set out trip cancellation/trip interruption coverage but because the policies were not reviewed, the Property Bureau did not critically analyze them to discern whether they were authorized under Insurance Law § 1113.

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 § 3452. But since trip cancellation/trip interruption insurance was already being offered by property/casualty insurers, the bill did not add “trip cancellation/trip interruption” coverage as an authorized kind of insurance in Insurance Law § 1113(a).

Given § 153.6(a) of New York Comp. Codes R. & Regs.(“NYCRR”), tit. 11, Part 153 (“Regulation 135”) requires Department approval of any policy form that provides group property insurance coverage, the Property Bureau began reviewing trip cancellation/interruption policies. In doing so, however, a number of questions arose about the application of the new statute. This opinion answers those questions.

Analysis:

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 § 3452 nor any other provision of the Insurance Law proscribes an insurer from issuing a travel insurance policy on an individual basis, provided that the policy contains only authorized kinds of insurance that the Department has licensed the insurer to issue.

The Department sought the enactment of Insurance Law § 3452 to facilitate the issuance of travel insurance on a group basis, with no intent to affect individual policies. Prior to the enactment of Insurance Law § 3452, an insurer could not issue property/casualty travel insurance on a group or blanket basis, see Department Circular Letter No. 12 (1991), although Insurance Law §§ 4235 and 4237 long had authorized group or blanket accident and health coverages, respectively, in certain instances. As a result, an insurer that desired to sell travel insurance that contained both accident and health and property coverages could not issue these coverages together in one policy on a group basis. Rather, the insurer had to either issue an individual policy including both coverages, or two separate policies – a group policy for the accident and health coverages, and an individual policy for the property/casualty coverages. Insurance Law § 3452 changes that legal landscape.

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 § 3452 allows an authorized insurer to issue a group property travel insurance policy to 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. The statute does not specify a trust created on behalf of any person who may have occasion to travel as a permissible group.

Insurance Law § 3452 also permits an authorized insurer to issue a group property travel insurance policy to 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 issuance of the policy would not be contrary to the best interests of the public. The Department has not to date promulgated any regulation defining such additional groups. Consequently, insurers may only issue group property travel insurance policies to the groups set forth in Insurance Law § 3452.

3. Definition of “Trip”

The query concerns the meaning of “trip” for purposes of Insurance Law § 3452.

Insurance Law § 3452 limits a group member’s coverage under a group property travel insurance policy to a “particular trip,” but the Insurance Law does not define the term “trip.” A trip by its ordinary and accepted meaning, see N.Y. Statutes § 94, commonly means the act of traveling from one place to another and returning therefrom. See Webster’s New World Dictionary: Second College Edition (1980) at 1521 (“a traveling from one place to another and returning; journey, esp. a short one; excursion, voyage, jaunt, etc.”); New Oxford American Dictionary: Second Edition (2005) at 1801 (“a journey or excursion, esp. for pleasure”; “an act of going to a place and returning”). Such a trip could involve a journey for the purpose of pleasure, business or education, or meeting other personal needs, including a journey to the location of a property for which the insured has a timeshare or similar arrangement (such as a property exchange). A travel insurance trip is also generally temporary as opposed to long term, and is a special excursion as opposed to a routine one such as a shopping trip or regular commute to work.

4. Trip Cancellation/Trip Interruption: Kind of Insurance

Inasmuch as § 3452 provides that a group property travel policy may include trip cancellation and trip interruption insurance, the query concerns whether trip cancellation/trip interruption is an authorized kind of insurance under the Insurance Law and, if so, what kind.

Insurance Law § 1113 categorizes most of the various types of insurance based upon the fortuitous event that triggers coverage. See, e.g., Opinion of Office of General Counsel (“OGC Opinion”) No. 05-03-14 (March 17, 2005). Thus, prior to the enactment of Insurance Law § 3452, the Department classified trip cancellation/trip interruption coverage as accident and health insurance to the extent that it covered cancellation due to sickness, injury or death, but to the extent that the policy covered cancellation due to other reasons, the coverages had to come within one of the several property/casualty kinds of insurance. See Insurance Department Circular Letter No. 24 (2006). See also Opinion of Office of General Counsel No. 01-04-18 (April 18, 2001) (categorizing ticket cancellation insurance on the same basis). Applying this reasoning, some of the triggers for trip cancellation/trip interruption coverage that the Department has observed in travel insurance policies, such as cancellations due to weather, terrorist attack at the destination, mandatory evacuations for health or nature disasters, hijack and quarantine would constitute miscellaneous property insurance, as defined in Insurance Law § 1113(a)(5). But other triggers would not otherwise fit within an authorized kind of insurance. For instance, trip cancellation/trip interruption for an emergency call to military duty would not come within a permissible kind of insurance under Insurance Law § 1113(a). See OGC Opinion dated June 6, 2008.

In enacting Insurance Law § 3452, the Legislature apparently conceived of trip cancellation/trip interruption coverage as a type of property coverage, regardless of the reason for the cancellation, even if accident or health-related. Moreover, divvying up coverage across a myriad of kinds of insurance depending upon the particular reason for the trip cancellation or interruption would require insurers to report the coverage over several lines in the annual statement, which would itself create administrative difficulties. Thus, to give full effect to the Legislature’s intent, the Department will construe trip cancellation/trip interruption insurance as a property–type of insurance covering the cancellation or interruption of a trip, and will not focus on the reason or reasons underlying the cancellation/interruption (provided, of course, that such reasons arise from a fortuitous event, see Insurance Law § 1101)).

Trip cancellation/trip interruption coverage most relates to marine insurance, and specifically inland marine insurance, which is defined in Insurance Law § 1113(a)(20). The Department interprets the inland marine insurance definition to “pertain to the insuring of property in transit over land; the insuring of property which is mobile by nature and for which there is no fixed situs; and the insuring of property which are instruments of communication or transportation such as bridges, tunnels, piers or television antennas.” See Department Circular Letter No. 22 (2000).

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 § 3452.

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 § 1113(a), “Change of Mind” coverage is not incidental. Rather, it stands in place of trip cancellation/interruption insurance because it covers cancellation for any reason at all.

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 § 3452. Specifically, the query concerns whether personal effects coverage includes rented sports equipment or rental cars.

Pursuant to Insurance Law § 3452(a)(4), a property travel insurance policy may provide coverage on a group basis for “personal effects.” That statute does not define the term “personal effects,” but they are commonly known to mean property of a personal nature that is movable. See Black’s Law Dictionary (8th ed. 1999) at 1163 (“items of a personal character, esp., personal property owned by a decedent at the time of death”). In the context of travel insurance, personal effects would constitute moveable property in which the insured has an insurable interest (as defined by Insurance Law § 3401) and that the insured carries or brings on the trip, whether owned or rented. Such property may include, for example, a pet, golf equipment or other sports equipment owned by the insured, a laptop computer, jewelry, prescription medications (lost or damaged) and other personal items. Further, personal effects coverage may cover loss or damage to such items as a result of a fortuitous event, such a hotel room burglary. However, motor vehicles, although moveable, are not typically considered to be personal effects; consequently, personal effects coverage therefore does not include coverage for damages to a rental car.

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 § 3452.

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 § 3440. That statute requires an insurer to include rental vehicle coverage in all of its private passenger motor vehicles insurance policies that insure less than five vehicles. The Department classifies the Insurance Law § 3440 rental coverage as liability coverage. See Opinion of Office of General Counsel No. 05-06-03 (June 2, 2005).

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 § 3442 authorizes a property/casualty insurer to provide coverage for loss or damage to a rental vehicle on a group basis if such coverage is provided to a group consisting of credit card, debit card or checking account holders. Insurance Law § 3452, however, authorizes group insurance only for trip cancellation, trip interruption, baggage, and personal effects coverages, and thus does not authorize an insurer to provide rental vehicle coverage on a group basis. Therefore, unless the car rental damages coverage is provided to a Insurance Law § 3442 credit card, debit card or checking account group, the insurer may not offer it on a group basis.

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 § 396-z. Such coverage, depending upon how it is written, may be provided either as “property damage liability insurance,” which is defined in Insurance Law § 1113(a)(14), or as “motor vehicle and aircraft physical damage insurance,” which is defined in Insurance § 1113(a)(19). Thus, the coverage comes within a kind of coverage authorized by the Insurance Law, and may be provided on an individual basis.

For further information you may contact Senior Attorney Brenda M. Gibbs at the Albany Office.

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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.