All Leisure Holidays Ltd v Europaische Reiseversicherung AG & Ors

An insolvency protection policy covering cancellation of travel arrangements may respond where the original tour operator becomes unable to perform, even if another operator provides an equivalent cruise. The relevant question is whether the arrangements promised by the insured operator were cancelled, viewed in the contractual and regulatory context. Loss may consist of deposits or advance payments which the insolvent operator was obliged, but unable, to repay. A later agreement securing replacement services does not necessarily extinguish that loss. A policy requirement to prove loss does not, without express wording, require completion of a particular claim form.

Hebridean International Cruises Ltd entered administration after passengers had paid for cruises on its vessel. The claimant purchased the vessel and operated the scheduled cruises itself. Passengers assigned their insurance claims to the claimant, which sought an indemnity for payments made to the insolvent operator.

The policy had been issued to provide passenger protection insurance in the context of the Package Travel, Package Holidays and Package Tours Regulations 1992. The court was asked to determine whether the cruises had been cancelled, whether the passengers had suffered loss, and whether claims failed because some passengers had not completed claim forms.

1. The court determined all three points of principle in favour of the claimant. The assigned claims were enforceable.

2. On the proper construction of the policy, the declared trip travel arrangements were cancelled when the original operator became unable to perform them by selling the vessel. The word cancellation referred to circumstances in which the operator was unable or unwilling to provide the promised cruise. Express notice of cancellation was unnecessary. Requiring such notice would undermine the policy’s function as security for repayment obligations under regulations 13 and 16 of the Package Travel, Package Holidays and Package Tours Regulations 1992.

3. The passengers suffered financial loss because the insolvent operator was obliged to repay their deposits and advance charges but could not do so. The fact that passengers later obtained replacement cruises without paying again did not eliminate the loss. Their claims were restitutionary or claims in debt, to which the duty to mitigate did not apply. The agreement securing the replacement cruises was res inter alios acta, applying the reasoning in Haviland v Long [1952] 2 QB 80.

4. The requirement in clause 2(c) to prove loss to the insurers’ reasonable satisfaction did not require completion of a particular claim form or proof that the loss was outside an exclusion. The loss had been proved. Clause 2(d) was not determined because no request for assistance had been pleaded.

5. The claimant’s commercial purpose in pursuing the assigned claims differed from the policy’s purpose, but that did not prevent enforcement of valid assigned claims.