Travelex’s definition of “financial insolvency” leaves customer with an empty pocket


Alexander Petlyarsky’s hotel reservation is not valid, even though he paid for it. Will his travel insurance cover the loss?

Question: Earlier this year, I made a reservation through Hoteling.com at the Hotel Residence in Amalfi. I purchased a Travel Select Policy for my trip from Travelex, just like I’ve been doing for the past 15 years.

A few months later, I received an email that said Hoteling.com was no longer in business, that my reservation was not secured and not paid, and that they are really sorry.

I called Travelex and filed the claim. I am not canceling the trip. I am asking that Travelex cover the price of the hotel. I made another reservation at the same hotel, with a price increase of around $900.

It was my understanding that insurance companies are on my side, protecting me from occurrences like this. Unfortunately it’s not so.

I need your help to appeal my claim, and hope that somebody at Travelex will look into this situation and help me. Thank you. — Alexander Petlyarsky, Furlong, Pa.

Answer: Travel insurance should cover you for this kind of event. Even Travelex’s basic insurance claims to protect you against “travel supplier financial insolvency.” So this looked like a simple misunderstanding.

It wasn’t.

You paid your online agency but it failed to pass the money along to the hotel. In other words, Hoteling.com took your prepaid reservation into bankruptcy protection with it. Our advocacy team checked with Travelex and here’s how it replied:

We have received an inquiry from Elliott.org regarding your claim and we are writing to advise that we have thoroughly reviewed your claim and unfortunately, the original decision to decline your claim has been maintained.

As per the Claim Administrator’s letter dated August 4, 2016, your claim was assessed under the Trip Cancellation and Interruption Covered Reasons, risk #5, which states:


5. Arrangements canceled by a tour operator, cruise line, airline, rental car company, hotel, condominium, railroad, motor coach company, or other supplier of travel services, resulting from Financial Insolvency;

Benefits were denied based on the policy definition of Financial Insolvency which is written as follows:

Financial Insolvency means complete suspension of operations due to insolvency, with or without the filing of a bankruptcy petition, whether voluntary or involuntary, by a tour operator, cruise line, airline, rental car company, hotel, condominium, railroad, motor coach company, or other supplier of travel services other than the person, organization, agency or firm from whom you directly purchased or paid for your Covered Trip provided the Financial Insolvency occurs more than 14 days following your effective date for the Trip Cancellation Benefits. There is no coverage for the complete suspension of operations for losses caused by fraud or negligent misrepresentation by the supplier of travel services.

As the booking was made directly with Hoteling.com/Lowcostbeds, the claim regrettably does not meet the criteria for coverage. The Travel Select Description of Coverage is attached for your reference and was emailed to you directly, at the time of purchase, on March 29, 2016 at 7:06pm.

In other words, because what happened to you doesn’t fit our narrow definition of insolvency — a definition not clearly spelled out in Travelex’s promotional material, and something that is impossible to anticipate — you’re outta luck.

But this is precisely why people buy travel insurance. Travelex is right but also dead wrong. A denial like this undermines confidence in its insurance product.

I recommend that you contact your credit card company to dispute these charges. Most credit card issuers limit disputes on charges to 60 days, but your bank may still be able to assist.

This case wasn’t resolved the way you or I would have liked, but there’s still hope for a refund.


Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or check out his adventures on his family adventure travel site. Contact him at chris@elliott.org.

  • Alan Gore

    See what I mean when I complain about weasely insurance terms? I reread Travelex’ explanation of its bankruptcy coverage several times and I still don’t understand why OP isn’t covered for Hoteling’s bankruptcy.

    Definitely try for a credit card chargeback, and do not under any circumstances do business with Travelex.

  • Inquirer1111

    And I always thought Travelex was the best of the travel insurance companies. Oh well.

  • John Baker

    Travelex would cover him if the hotel went bankrupt but not the travel agent. Basically, they won’t cover anything if you book directly and won’t ever cover you if the person you paid the money to goes bankrupt.

  • John Baker

    Since its a case of non-delivery, his credit card company should be able to refund his money regardless of when he made the payment. Better route than trip insurance.

  • Rebecca

    In bankruptcy (and I’m speaking in general here and not in absolutes – I was the person that did this at the bank, and yes, I know there are exceptions), the bank account associated with the direct deposits via ACH (which are settled, usually every business day) that the bankrupt business used as a cash flow account, along with most others, is normally frozen. Provided there isn’t a tax lien – the IRS and then state always get paid first – and there isn’t a substantial outstanding line of credit at that same bank, a dispute may be possible. Additionally, many times the company processing the payments sees it coming, and they will hold off on releasing the funds, albeit for their own interest. It certainly never hurts to ask.

  • Rebecca

    They’re only going to cover it IF it’s recoverable. It’s past the time frame where they are legally required to do so. Often, the bank(s) processing the payments sees it coming in the form of a cash flow problem. So all is not lost.

  • John Baker

    @disqus_eRRiqftGfu:disqus Everything I can find online and directly from the folks that hold my merchant account says the opposite. In the event of bankruptcy, my processor is required to “make good” on any charges for undelivered goods. Its one of the reasons that they keep a very large “reserve” to protect themselves against this.

    For those that don’t know, a “reserve” is a protected amount of money that the processor maintains access to. It can be cash, credit or equivalency.

  • Rebecca

    Yes, that’s true. BUT this purchase was made several months ago and this protection doesn’t extend indefinitely. By law, the credit card company is only required to give the money back for a dispute initiated within 60 days of the bill the charge appears on being mailed. After this, they’re not going to eat the loss. The OP is simply an unsecured creditor in a BK proceeding. And, in that case, he’s not getting anything for all practical purposes.

  • Asiansm Dan

    Good to know, Travelex will be on my blacllist.

  • Pegtoo

    Am I reading their terms correctly? If you do not buy directly with the hotel, airline, cruise company… bankruptcy is not covered? (So if I use a travel agent for my next trip- would I typically pay the agency or the airline directly?) Or just avoid Travelex… they’re the only ones with this verbiage?

  • John Baker

    @Pegtoo:disqus Normally you’re covered by you credit card company for non-delivery if the place you paid directly goes bankrupt.
    Most, but not all, of the time payments made for agent bookings are made and charged directly with the property or tour company. You need to be concerned if your agent starts running your card under their name.

  • BubbaJoe123

    Credit card chargeback. Even if it’s outside the 60 days, they’ll very likely reverse the charge in this situation. If they won’t, you need a better credit card company.

  • cscasi

    I just checked the wording on the policies I use from Travel Insured International and under Coverage B Trip Interruption “Other Covered Reasons”, m., it states: Bankruptcy or Default of an airline, cruise line, tour operator or other travel provider (other than the Travel Supplier, tour operator, travel agency, organization or firm from whom You purchased your Travel Arrangements)………
    So, it looks like this is common language in travel insurance policies; something I did not know until this came up today. I guess if one books months out using one of the above excluded in parentheses, one may not get anything back if it goes bankrupt or defaults (unless it has some sort of insurance covering it for such things).
    This is a wake up call for those of us who were unaware!

  • Annie M

    Correct. Your agent should NEVER charge your card – it should only be the actual supplier of the travel.

  • Annie M

    This is because the hotel didn’t go out of business, the supplier did. He now becomes a creditor under the bankruptcy courts. But the wording is misleading when it says

    other supplier of travel services other than the person, organization, agency or firm from whom you directly purchased or paid for your Covered Trip

    He booked and paid hoteling.com and that is who went bankrupt.

    He should file a complaint with his states Dept. of Insurance and see if they agree with Travelex.

  • Lindabator

    travel insurance NEVER covers the company’s going under when the policy is purchased FROM the vendor (that would be self insuring) – IF he had purchased 3rd party – gone to TraevlEx directly – he WOULD have been covered. That is why we ALWAYS tell you not to take a vendor’s insurance

  • Lindabator

    IF had not purchased the vendor’s insurance, but purchased a policy DIRECTLY from TravelEx, would have been covered – this is why you NEVER buy the vendor’s insurance

  • Lindabator

    NO – TravelEx is a fine company, but he bought the insurance FROM the vendor who went under, and that is NEVER covered – only covered if he had bought from TravelEx directly, not the vendor.

  • Lindabator

    unless they run a service charge – and that should be clearly stated — we would see a Delta charge, and then an agency service fee right beneath that charge

  • Lindabator

    NO company can sell insurance to cover its OWN insolvency – which is why you should not buy THEIR insurance policy – go directly to TravelEx and it is covered.

  • Lindabator

    It is – but he bought the VENDOR’s policy, and it CANNOT self-insure against insolvency — you need to purchase 3rd party (go directly to TravelEx) for that coverage. Have had the same situation happen — a client booked a package and I insured with TE directly, their friends booked the “cheaper” insurance with the vendor. Vendor went under, they were unable to make a claim. My clients got a full refund

  • Lindabator

    Not at all — people just need to understand that the law does NOT allow a company to self-insure against insolvency — so if you want insurance against this issue, CANNOT buy the vendor’s – go directly to the insurance company

  • Lindabator

    That is why I always insure my clients with the insurance company directly – then the travel provider of the policy is NOT the vendor, but the insurer.

  • Inquirer1111

    Thanks for clarifying. I ALWAYS by direct from Travelex. However, had he brought it direct from Travelex, would it have been covered or still been the exception?

  • Lindabator

    they would – NO insurance allows a company to self-insure — if the company goes under, your insurance you took with them is useless — you had to have covered with the insurance company directly to cover that mess

  • Charles Owen

    Is it just me or does this language pretty much mean they don’t have to ever pay at all?

    Financial Insolvency means complete suspension of operations due to insolvency, with or without the filing of a bankruptcy petition, whether voluntary or involuntary, by a tour operator, … other than the person, organization, agency or firm from whom you directly purchased or paid for your Covered Trip.

    So, if I purchase airfare directly from Delta Airlines and they go bankrupt I’m not covered? Delta is the firm from whom I directly purchased and paid for the flight. If I purchase a hotel room directly from Aardvark Inn and they go bankrupt I’m not covered? Are you only covered if you use a travel agent or an OTA so you don’t pay directly?

  • Inquirer1111

    So Travelex would have covered it if he had purchased separate from Travelex, even though Hoteling is listed as not covered? Sorry for posting this twice.

  • LeeAnneClark

    This is why I never buy travel insurance. The likelihood that they will cover whatever might happen to my travel plans is so low that it just doesn’t make sense. At this point, given the number of trips I have taken which I did not insure, the amount of money I’ve saved by not buying insurance far exceeds the money I might lose by something going sideways on one of my future trips. It makes more financial sense to just take that risk, then to repeatedly throw money at insurance policies that will probably not cover whatever happens anyway.

    Furthermore, given the fact that we all know insurance companies will fight tooth and nail to NOT have to pay any claim (even if it’s legitimate), the effort and frustration involved in getting reimbursed are just not worth it.

    I realize that every time I pre-pay for travel, that money is at risk if something goes wrong. But given the extremely low probability that I would get any kind of reimbursement from insurance coverage, and the amount of headaches it would take to get it…I’d rather just take the gamble. It’s a calculated risk.

    And at this point I’m way ahead of the game.

  • Rebecca

    That’s good advice. I know not to buy the “protection plans” they offer. But I wouldn’t have known this was another reason.

  • Rebecca

    No credit card company is going to eat this substantial amount of loss. The OP said the rate went up by $800, so I assume the original reservation is in the thousands. If they can’t recover it, he’s going to lose, unfortunately. If it was a small charge, say $25, they would probably eat it if he’s a profit generating customer. But not thousands of dollars.

  • Michael__K

    The customer here bought Travel Select directly from TravelEx and he is NOT covered, per the language quoted in the article which is found in every TravelEx policy including TravelEx Max.

    There are other travel insurance policies from other companuies which do not define insolvency as narrowly and which would probably have covered this.

    Hoteling.com does not even sell TravelEx BTW.

  • Michael__K

    Incorrect— read Travel Ex’s definition of Insolvency which is quoted in the article and which is found in all their policies.

  • C Schwartz

    No you would be covered with Delta; you would not be covered if you booked with some random internet company that kept the money for your ticket and did not pay Delta.

  • C Schwartz

    It sounds like no Travelex policy would cover these random online booking agents — Hoteling seems to have kept the money for all hotel bookings and did not pay the hotels —

  • Michael__K

    Normally you’re covered by you credit card company for non-delivery if the place you paid directly goes bankrupt.

    Most people book their major trips months in advance and are beyond the standard chargeback deadline by the time they plan to travel.

    @Joe Farrell has written before that the 2-month chargeback deadline is supposed to be relative to the date that the service was not rendered. But good luck getting your credit card company to agree with that interpretation of the Fair Credit Billing Act without hiring an attorney….

  • C Schwartz

    I have a question — is the traveler asking the insurance company to cover the increase in rate when he had to make a new reservation, ie the $900? Or did he prepay through Hoteling and they ran off with the money and that is what he wants reimbursed?

  • Daddydo

    I am more curious than ever about hoteling.com. Trying to save some money seems quite natural, but when you go to an “oddburt” type website like this, you sort of get what you paid for. The average person goes online and sees their hotel on Expedia, Orbitz, etc, they call and agency that is local and reliable, then book on hoteling.com. Was there a 10%, 50% difference? What did it get the OP? One large loss.

  • Michael__K

    @Lindabator:disqus is incorrect. The definition of “Financial Insolvency” quoted in the article is found on all TravelEx plans sold direct to consumers including TravelEx Max.

    It plainly states you are NOT covered for the insolvency of “the person, organization, agency or firm from whom you directly purchased or paid for your Covered Trip”

  • Michael__K

    To complicate matters in this case, Hoteling.Com was a UK company. [ACH is a US-only framework]

  • Michael__K

    All TravelEx policies sold direct to consumers define “Financial Insolvency” as quoted in this article.

    If “the person, organization, agency or firm from whom you directly purchased or paid for your Covered Trip” goes bankrupt, it is not covered as a “Financial Insolvency”, per the plain language in the policy….

  • Michael__K

    This customer DID go directly to TravelEx, the insurance company. TravelEx does not cover this.

    Hoteling.com was a UK company, which did not even sell TravelEx.

  • Michael__K

    We know the new reservation at the same hotel cost $900 more…

    It could be the rates went up, or it could be that all or most of that $900 corresponds to the original price savings (which was maybe too good to be true and maybe a hint that this was a shady business).

  • Michael__K

    The language is not so clear. Is Delta not an “organization” or “firm”?

    If you booked with “Delta Vacations” then I think it’s pretty clear you would NOT be covered.

  • C Schwartz

    Airfare from Delta I hope would be covered under airline, but as you said Delta Vacations may be another thing– This is very confusing, and likely would take lawyers to figure out.

  • Alan Gore

    So that’s Travelex’ excuse for refusing coverage? Is it not a valid policy unless you buy it directly from Travelex, or do you still get coverage for conditions other than default by the travel agent?

  • Harvey-6-3.5

    Can you show us the language in the direct contracts that would allow recovery (because I can’t find it). Thanks!

  • joycexyz

    Ever tried to read one of those insurance policies? Even a law professor would have a problem! Right now I’m trying to compare a policy offered through a tour company with policies offered through other companies. So many disclaimers and “ifs”! I realize the importance of insurance if you’re spending a lot of money on travel, but I’m really agonizing over this. But as to the matter at hand…another problem with an OTA. The few bucks he might have saved has resulted in a loss of the entire amount. Is it too late to file a dispute with the credit card company?

  • joycexyz

    Interesting point of view. Right now we are arranging a trip that will cost about $6000. The tour company (one with a good reputation) is offering us insurance for about $350. I checked into insurance from other companies (highly rated ones), and the quotes are at least twice that, some over $1,000–probably because of our ages (over 70), even though we’re in excellent health and active. At $1000+, that’s at least 17% of the cost of the trip. Hmmm…

  • LeeAnneClark

    Before you even consider purchasing that cheap policy, be sure to take a very close look at what it actually covers – and remember to parse words very carefully. As you can see from this story here, insurance companies write their policies very ambiguously so that they can deny most claims, based on the twisted wording in the fine print. I guarantee you that you will find that it covers a very few specific situations, most of which are highly unlikely to happen to you. And even if they did, you would still have a hard time getting any money out of them. Also, check to see if it’s “insurance” or “trip protection”. BIG difference!

    Another thing I’ve learned from years of reading Christopher’s blog is that it’s just not a good idea to buy insurance from the travel company itself. There have been innumerable articles in here about passengers who bought protection from the cruise line, airline or tour company, and it rarely turns out well. Paying for those plans is pretty much assured to be just throwing away your money.

    The higher priced insurance policies you are looking at from other companies are probably actual trip insurance, which is why they are so expensive. If you really do want to insure your trip, those are the policies you need to buy. But you STILL need to carefully read the fine print of the coverage, and ask yourself how likely it is that any of that will happen to you.

    Do you travel frequently? If so, let’s look at the numbers. Let’s say your trips usually cost about $6000…and an actual insurance policy (one that isn’t useless “trip protection”, which is really just throwing away your money) costs about $1000. If you go on six trips and DON’T buy insurance, you have saved $6000. If on your seventh trip you fall and break something and can’t go, and lose your $6000, you are exactly where you would have been if you’d bought the insurance all that time. And if you don’t – you are now permanently ahead of the game.

    That’s where I am. I’ve spent…well…let’s just say a lot of money on trips over the years and never bought insurance – and never needed it. That means I’ve literally saved tens of thousands of dollars. If I lose all of my money on my next trip…so be it. I’m still ahead!

  • wilcoxon

    You keep saying this but please reread the article. This was a TravelEx policy purchased directly. Your comments about self-insurance are completely irrelevant.

  • LeeAnneClark

    Read my response to your earlier comment in this thread. In all honestly, unless you believe there is a high probability something is going to go wrong and you won’t be able to travel, it’s just not worth buying trip insurance. I never have, and I never will. Please don’t agonize over it. Don’t believe those who tell you that it’s important to insure your trip. It’s literally throwing away money.

    Yes, not insuring your trip means that you might lose your money. But so does insuring your trip – in fact by doing so, you are DEFINITELY losing money…no matter what happens!

    Let’s look at the numbers you gave earlier – $6000 for a trip, and $1000 for a (real) insurance policy. If you don’t buy insurance, you have a very small chance that you will lose $6000. But if you DO buy insurance, you have a 100% chance you will lose $1000! Keep in mind, even if you something went wrong, you filed a claim and got your $6000 back, you still don’t get the $1000 back.

    And what do you really think is the probability you are going to have something go wrong, file a claim, and have it actually fall within your policy’s narrow coverage?

    The numbers just don’t add up.

  • William Leeper

    Kind of. Most banks look at travel purchases and consider the date of travel/use as the beginning of the 60 day period. They are not required to do so, but the vast majority will. Your rights are not protected after 60 days, and you can be reported as late, but most will still accept the dispute.

  • William Leeper

    As has been pointed out several times, the op purchased the insurance directly from TravelEx.

  • William Leeper

    You would be surprised. Remember that the bank withholds a certain amount from payments to merchants so as to have a reserve to pay if something happens. Regardless, the FCBA requires that if he win the dispute the CC company has to recover their loss as they can, but they must credit the account immediately.

  • Rebecca

    Yes, many will accept it. If the money is recoverable (which it may be – like I pointed out), he’ll get it back. But I did this for a living. I can assure you he’s not getting it back from the card if the bank has to eat it. And they aren’t legally required to give a provisional credit outside the timeframe. Assuming it’s thousands of dollars, they’re not going to.

  • Rebecca

    My mom travels a lot. She tells me the best strategy is to consider the actual cost of the vacation gone. You end up lucky if you get it back. But medical evacuation is very very important. You do not want to be stuck somewhere and not able to get back, let alone if the medical facilities are subpar and/or will require cash up front. This coverage isn’t very expensive to be covered and covered well. I know someone that had to use it, and she literally would probably have died if she didn’t. It’s always good to remember what’s really important.

  • Annie M

    That is not what I am saying anyway. He wanted the difference in price, not what he actually paid hoteling.com.

  • Michael__K

    The article states the reservation he paid hoteling.com for was “not secured and not paid.” So that means he is out of pocket the whole amount PLUS $900 more.

    Regardless, TravelEx covers none of it, regardless of what he does.

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