Managing Your Travel Business: Professional Insurance for Agents
by John Hawks

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This type of business policy insures you (and/or your home-based travel business itself) against any claims from other parties (such as your clients) who allege that you have been negligent in providing your services as a professional travel agent.

The key term is “negligent,” of course. Basically, it means that you failed to apply the level of knowledge or skill that the average professional travel agent would have given that outside party under similar circumstances. In the past, this standard applied primarily to longstanding professional fields such as doctors and lawyers who were judged experts based on their degrees and licenses. Nowadays, though, it can apply to any business (including travel) in which you may promote yourself as an expert.

It’s easy enough to get sued for just about anything. If your clients aren’t happy with their vacations and trips, they may find it difficult to sue bigger suppliers like the airlines (that are largely exempt from many state laws, for example) and cruise lines (that force passengers to agree, in the fine print of their cruise tickets, to bring suit in places like Greece or Liberia instead of U.S. courts!). So, who’s left? You, the local travel agent! That’s why it’s not uncommon for home-based agents to find themselves in legal trouble every now and then with individual clients. And, even if you’re completely guiltless, you’ll end up paying lots of money in legal fees to defend yourself.

That’s where professional liability/E&O insurance comes in handy.

Many common policies for home-based agents will include some (or all) of the following protections:

1. Claims alleging that you made an “error or omission” – a mistake, basically – in booking or recommending travel products and services (e.g., you gave the cruise line an incorrect date for the client’s trip)
2. Claims alleging bodily injury to the client that may have occurred anywhere in the world (e.g., a client breaks her leg during an African safari)
3. Claims alleging property damage suffered by the client (e.g., the tour operator’s guide knocks the client’s camera off a restaurant table, breaking it beyond repair)
4. Third-party supplier bankruptcy or default (e.g., the airline on which a client is booked shuts down suddenly)

Don’t count on your homeowner’s insurance or other business coverage such as a “Business Owner’s Policy” or “Commercial General Liability Policy” to protect you completely as a travel agent. These policies have been designed to protect against the most basic risks of owning a business (e.g., a customer slips and falls inside your office), but they will not normally handle some of the risks mentioned above that are unique to travel agents.

Travel Professionals Insurance Network is OSSN’s preferred vendor for professional liability/E&O insurance. Another well-known provider in the travel industry is The Berkely Group.

Keep these questions in mind as you search for the best policy to protect your home-based travel business:

1. What are the policy’s limits per occurrence and per year? Most travel agent policies will have a limit that will be paid out in benefits per incident, with another limit set for all claims in total that you might have in a given year (the “annual aggregate”).
2. Does the policy offer coverage for worldwide claims? Remember, you’re sending clients all around the globe! It doesn’t make sense to pay for insurance that only covers claims in North America, for example.
3. What deductibles might you be responsible for paying? Some policies offer a $500 or $1,000 deductible as a means of lowering your annual premiums.
4. Do claim expenses reduce the policy limits? In other words, will the insurer deduct the administrative and legal costs of handling a claim from the benefit limits that might be paid – reducing, say, a $100,000 per-occurrence limit to $60,000 once the legal and administrative bills have been paid?
5. If you have outside sales agents of your own, can you add them to the policy as “additional insureds” (other individuals who will share your overall coverage under the same policy) – and, if so, what extra costs or premiums might you incur?
6. If you secure coverage through a host agency, how many other outside agents share the same policy? If your host agency offers a policy with a $1 million annual aggregate limit that’s shared by 2,000 other agents, it will only take a handful of successful claims for that insurance to run dry for the year – leaving you in the lurch!

(Photo/image credits: Travel Professionals Insurance Network; The Berkely Group)

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