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Travel Law

Travel Law
BY ALEXANDER ANOLIK

In countries the world over, travel and tourism is one of the largest service industries. In the United States, tourism is one of the three largest businesses in the nation, and the second largest employer. As leisure time and disposable income have increased, and with more corporate travelers servicing their businesses around the world, it is surprising that there are not more lawyers specializing in the practice of travel law.

In the 1970s, the travel industry was generally free of regulation (except for airlines). Today, the industry is subject to so much state regulation that the results, in certain states in particular, border on the absurd. Many lawyers have clients throughout the United States who are travel agents, tour operators, receptive operators or carriers, but are unaware of the myriad of travel laws that affect their clients.

California Sellers of Travel Law

The California Sellers of Travel Law1 was enacted in September 1994. “Sellers of travel,” who are located in California, or located outside of California but selling into California, are required to register with the Attorney General’s office and to pay a $100 per location fee. California-based businesses commencing operations as sellers of travel are required to pay $378 per location (as of January 1, 1999) to fund the Travel Consumer Restitution Fund (TCRF). The TCRF was set up to reimburse California consumers who purchase air or sea travel (whether alone or in conjunction with other travel services) from California tour operators or travel agents. However, interpreters of the Sellers of Travel Law have expanded its scope to such degrees that I believe serious constitutional questions have been raised.

Travel agents who are located in states other than California often think that California’s Sellers of Travel Law does not apply to them. However, if an agent has sold even one air or sea ticket to anyone in California since 1995, the agent is required to register as a seller of travel. That one ticket could include a ticket sold to parents or relatives, convention attendees, or friends of their customers. If you have clients who sell air or sea travel to anyone in California, but are not registered with the state, they should be advised that each ticket could constitute a separate misdemeanor, which could subject them to liability in the form of a $10,000 fine per violation. This is true despite the fact that the California consumer at issue will not be afforded the protection of the TCRF because the travel agent or tour operator seller is not a California company.

The strict enforcement by the California Attorney General’s office has had often harsh results. For example, the law has been enforced against clergy who invited their congregations or parishioners on trips to the Holy Land. The statute does not require that the seller of travel—in this case the member of the clergy—receive compensation. The law applies many time the clergy tells his or her congregation that their religious organization can “provide, furnish, contract for, arrange or advertise that he or she can or may arrange or has arranged wholesale or retail air or sea transportation, either separately or in conjunction with other travel services.”2

Broadly defined by the California Attorney General’s office, a seller of travel is anyone who says that he or she can assist you with your travel plans, even if the person is not receiving compensation. Certain entities are excluded from the definition of sellers of travel, including air carriers, ocean carriers, or hotel or motels or similar lodgings that in the course of selling, furnishing, providing, contracting, or arranging transient lodging and accommodations and related services of its registered guests: (1) also arrange for transportation, and (2) do not directly or indirectly receive any money or any valuable consideration for providing that transportation.3

An Increasingly Complex Field

Travel law started out as a relatively uncomplicated niche practice within the legal community of informing travel agents and travel trade associations how to avoid legal complications, while at the same time protecting consumers. Today, the practice is far more regulated and complex.

The European law and practice, emerging with the formation of the European Union, differs from U.S. laws and practice in many respects. Following the German strict liability laws, the European directive initially was one of almost strict liability. However, a semi-strict liability standard has emerged that requires travel operators to give consumers a “proper” tour, and provides for local offices to settle claims on the spot if incidents occur.

Disclosure Notices

In the United States, disclosure notices help to set forth the relationship between the U.S. travel agent and the consumer. I make sample disclosure notices available on my website, www.travellaw.com. I encourage travel agents to consider including them (subject to review by travel law counsel) either on the back of itineraries or as an insert to the tickets they send to the customer. Notice should be given on the front of the invoice reminding the consumer to read the very important details and information on the back of the form (see sidebars).

With the exception of adventure tours or high-risk transportation, I do not advise agents to have disclosure notices signed, because that could harm the relationship between the consumer and the agent. Further, while an agency does not want to scare its customers into using their discretionary dollars to buy a washing machine rather than a trip, it is important that consumers be told of certain information such as terrorist activities or relevant health conditions.

Lost or Damaged Baggage

One area most lawyers and their clients have personally experienced is lost or damaged baggage. The good news is that under the rules of the 1929 Warsaw Convention, signed at The Hague in 1955 and becoming effective in August 1963, a carrier is responsible for either destruction of, or damage to, checked baggage or goods, if the damage took place during international transportation. The bad news: Liability is limited to the sum of $20 U.S. per kilogram ($9.07 per pound), unless the consignor has made, at the time the baggage was handed over to the carrier, a special declaration of the excess value at delivery and has paid any necessary premiums. Under the Convention liability limits, “carry on” baggage liability is limited to a mere $52.75 per passenger, regardless of the number of carry-on articles. In contrast, under U.S. Department of Transportation regulations, liability for the loss, damage, or delay of domestic baggage is limited to $1250 ($2500 after January 1, 2000).

When multiple airlines are involved, the airline that carried the passenger to her ultimate destination is responsible for payment. Unfortunately for consumers, the airlines file tariffs that exclude coverage for so many items (medicine, cash, jewelry, cameras, recorders, etc.) that the unsuspecting consumer, writing to the carrier and listing all these items, is sometimes left with only reimbursement for the suitcase itself.

Overbooking

Airlines. In early airline overbooking cases, prior to Nader v. Allegheny Airlines,4 lawyers could sue the carriers for misrepresentation when their clients were inconvenienced. Today, public disclosure by airlines of their deliberate overbooking and boarding procedures (printed on the backs of ticket jackets or on signs on most ticket counters) has lessened their exposure to these claims. The Department of Transportation has established set compensation if the passenger strictly complies with the carrier’s reservation confirmation and check-in requirements,5 and allows the passenger to sue the carrier if the passenger elects to decline the payments.

Hotels. In dealing with the rights of lodgers and innkeepers—an area lacking the federal protections that govern airline overbooking—a common problem is deliberate overbooking by resorts or hotels. Although only three states have laws that codify the common law position that makes a holdover guest a trespasser, no state has passed exculpatory laws to permit hotels to overbook rooms. Certainly, the misrepresentation and fraud theories formerly utilized in the aviation industry (prior to the Nader case) should be applicable to counsel handling corporate and leisure passengers inconvenienced by hotel overbooking.6

Insurance

Traveler’s insurance raises various issues. I believe that relying on “self-insured” tour operators or cruise lines is not a wise risk management decision since the entity that could go bankrupt is also the entity insuring itself. Advise your tourist client to purchase separate travel insurance from a reputable insurance vendor other than the vacation company. Coverage could include supplier default, bankruptcy, medical evacuation and treatment, and/or trip interruption coverage. Also ensure that the tour operator is covered by an errors and omissions policy.

In travel law cases involving rental cars, the rental company is generally not liable for negligent entrustment unless it actually had “reason to know” that the lessee was incompetent to drive the vehicle.

Cruises

With less than 6 percent of the vacationing public having taken a cruise, the potential market for cruises is virtually unlimited. The all-inclusive price of a berth, transportation, entertainment, food, and sightseeing can be less than the cost of a European hotel for one night. However, the novice plaintiff practitioner who wants to sue a cruise line on behalf of an unhappy client may run into unusual problems.

Most cruise tickets include specific contract provisions (on the back of the ticket) restricting litigation to a particular state or country—for example, most specify Greece as the proper jurisdiction. These provisions have proven disappointing to many a plaintiff’s counsel bringing local actions for disrupted activities, slip and falls, and various torts.7 The restrictions on many of the cruise lines’ contracts of carriage have also frustrated many of the potential class action or strict liability food poisoning cases. These cases likely would have otherwise yielded adequate compensation for the injured passengers in local jurisdictions.

Not an Insurer

Travel agents are not normally liable for the negligence of third-party suppliers, such as tour operators, resorts, or hotels; and tour operators are not normally liable for the negligence of independent contractors that provide services to the tours. But the tour operator is responsible for coordination, and may have a duty to warn of known or foreseeable risks (although not to warn of merely possible hazards that may exist on the properties of others).

McCollom v. Friendly Hills Travel Center8 sets forth the basic proposition that while a travel agent has a duty to use reasonable care, he is not an insurer. With this in mind, lawyers should research the jurisdictional limitations and liability issues before bringing litigation against travel agents when the damages were caused by third parties (such as overbooking by a hotel or air carrier even though the travel agent received a confirmed reservation).

In California, the Court of Appeal has ruled that although a travel agent has a duty to warn consumers of dangers of which the agency is aware, or should be aware in the exercise of due care, “the law requires only that agents be loyal, not prescient.”9 CL

Notes

 

1 Business and Professions Code § 17550.1 et seq.
2 Business and Professions Code § 17550.1.
3 Id.
4 365 F. Supp. 128 (D.D.C. 1973), rev’d 512 F.2d 527 (D.C. Cir. 1975), rev’d and remanded 426 U.S. 290, 96 S. Ct. 1978, 48 L.Ed. 2d 643 (1976), reaffirmed in part, 445 F.Supp. 168 (D.D.C. 1978), rev’d 15 Aviation Cases 18,179 (D.C. Cir. 1980).
5 See generally, 14 C.F.R. Part 250.
“...a carrier...shall pay compensation to passengers denied boarding involuntarily from an oversold flight at the rate of 200 percent of the sum of the values of the passenger’s remaining flight coupons up to the passenger’s next stopover, or if none, to the passenger’s final destination, with a maximum of $400. However, the compensation shall be one-half the amount described above, with a $200 maximum, if the carrier arranges for comparable air transportation, or other transportation used by the passenger, that, at the time either such arrangement is made, is planned to arrive at the airport of the passenger’s next stopover, or if none, at the airport of the passenger’s destination, not later than 2 hours after the time the direct or connecting flight on which confirmed space is held is planned to arrive in the case of interstate and overseas air transportation, or 4 hours after such time in the case of foreign air transportation.” 14 C.F.R. 250.5 “Amount of denied boarding compensation for passengers denied boarding involuntarily.”
6 See, e.g., Rainbow Travel Service, Inc. v. Hilton Hotels Corp, 896 F.2d 1233 (10th Cir. 1990).
7 See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991).
8 172 Cal.App.3d 83 (1985).
9 Id.