Dear Travel Agents/Advisors,
Last week we spoke about the Terms and Conditions that TA’s should send to their clients and have them read, initial and sign. Rather like the way a doctor has patients sign consent forms. (But, who really reads them?)
Today, let’s talk about E&O (Errors and Omissions) insurance. As a disclaimer, I am not an attorney nor am I an insurance agent. I mentor Travel Agents/Advisors on how to succeed in their business based on my background of having 2 tour operator companies and working directly with the public and travel agents.
E&O insurance is also referred to as “professional liability” insurance and can be a good fit for any business that provides services to clients, especially those that charge a fee for their service. What is E&O Insurance?
Errors and Omissions insurance covers some of the errors and omissions you may make. But it doesn’t cover all errors or all omissions. It is much smarter to think of it as catastrophic insurance – for when something goes horribly wrong. It will not cover the $500 mistake of booking the client in the wrong room – but will cover you if someone sues you for an exorbitant amount. E&O insurance also covers your legal defense. Regardless of the reason for the lawsuit, your legal defense will be covered up to your policy limit, until you are proven guilty. Your legal defense will not be covered for sexual misconduct, intentional acts, and criminal acts. Read your policy carefully. Be sure that if you work with specific groups of travelers or a specific niche that the travel you’re booking is covered.
What Doesn’t E&O Insurance Cover?
E&O does not cover things like debit memos from the airlines, or if you provided the wrong info for travel insurance. If your error/omission had no negative consequences beyond paying the deductible, and you/your client benefited from the error/omission, that’s a moral hazard. And insurance companies don’t pay for those claims.
An agency quotes a client $4,000 for a trip that really costs $5,000. The verdict: Your client is happy because they saved $1,000. You’re happy because the client booked. BUT the insurance companies will call that a moral hazard, accident or not, and will not pay.
Your clients are going on a cruise out of Thailand. You let them know they don’t need any special visas, etc. Due to a flight delay and they miss the cruise departure from Thailand and have to catch up with it at the next port, Vietnam, which requires a visa. They end up missing half of their cruise and sue you for the cost of their trip. The verdict: Your unhappy client did not benefit. You did not benefit and could not predict the flight delay. The insurance company would probably cover this.
Do You Need an E&O Policy?
By law, you’re not required to have an E&O policy in the United States. Everyone has different levels of risk they’re comfortable with. Some host agencies allow their independent contractors to be covered under their E&O policy. Others require that the independent contractor obtain their own.
Are there E&O Policies specifically for Travel Agencies?
Call the company you have your homeowners or car insurance with and ask them for a quote to add E&O insurance to your policy. The price of a policy is based on your total agency sales. Also, make sure to ask your consortia, travel agent associations, and/or host agency about any preferred insurance suppliers to save some money.
Travel agents should understand E&O insurance will not fix all mistakes. Ultimately, it is about knowing and weighing the risk and doing whatever you’re comfortable with.
Now you know better!
There are other ways to protect the way you do business. I like to teach these things to the TA’s I mentor instead of writing them all out in my blogs. Feel free to reach out!