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.

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