An EU court has offered its view on an ongoing case in Belgium between holiday-makers and an insurance company that is refusing to reimburse them after their travel agent became insolvent.
The Court of Justice of the European Union (CJEU) has clarified this week that where a travel agent is insured against insolvency, the insurance company is still obliged to pay out if travellers cancel their trip due to "unavoidable and extraordinary circumstances" before the travel agent became insolvent.
In a case currently before the Brussels Dutch-Speaking Business Court, four travellers are pursuing a refund from insurance company MS Amlin Insurance SE.
The tourists had purchased a trip from Belgium to the Dominican Republic from travel agent Exclusive Destinations for almost €37,000, which was due to take place in March 2020.
The trip was postponed due to the Covid-19 pandemic, and the travellers eventually terminated the contract for the trip in October 2020, seeking a refund.
Refusal by insurer to pay out refund
A few months later, in December 2020, the Belgian courts declared Exclusive Destinations insolvent. In January, the holiday-makers pursued the travel agent's insurer, MS Amlin Insurance, for a refund.
MS Amlin Insurance refused to make the refund, on the grounds that it only provides insurance when travel agents fail to provide services due to insolvency, and not when customers terminate their contracts.
The travellers then took the matter to the Brussels Dutch-Speaking Business Court, who posed a question to the CJEU about the scope of EU laws around package holidays.
A request for a preliminary ruling on the same piece of legislation was made by the Austrian courts, regarding a case of Austrian travellers who had cancelled a trip to Gran Canaria during the pandemic.
The EU Package Travel Directive requires Member States to ensure that organisers of travel holidays have insurance, to provide refunds for customers in the event that the agent becomes insolvent.
In its preliminary ruling published on Monday, the CJEU said that the insurance against the insolvency of a package travel organiser also applies where a traveller cancels the trip because of "unavoidable and extraordinary circumstances", and later the travel agent becomes insolvent.
No reason why travellers should be treated differently
The court said that there is no reason why travellers whose holiday cannot go ahead due to insolvency, and travellers who have cancelled their package travel because of unavoidable and extraordinary circumstances should be treated differently.
The CJEU emphasised that under the directive a traveller is entitled to a full refund of any payments made in the event of cancellation due to unavoidable and extraordinary circumstances.
That entitlement would be "deprived of its effectiveness" if, where a travel agent becomes insolvent, insurance against insolvency did not cover these existing refund claims.
The CJEU's preliminary ruling is not a final decision on the dispute in Belgium. The ball is now in the Belgian courts, to issue a binding decision in accordance with the CJEU's ruling.
