Orders of the Day — Package Holidays (Insurance)

– in the House of Commons at 11:20 pm on 27 April 1987.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Portillo.]

Photo of Mr Peter Fry Mr Peter Fry , Wellingborough 11:30, 27 April 1987

I raise the question of monitoring tour operators' codes of conduct because of the circumstances surrounding a holiday in a Greek apartment booked through Intasun in June 1986 by my constituents Mr. and Mrs. Shaw, and their daughter Emily, now aged two.

On studying the Intasun brochure my constituents accepted the recommended holiday insurance. Perhaps it should be noted that Intasun, like many other operators, makes it difficult to decline its preferred insurance as it is necessary specifically to refuse it. Nevertheless, the Shaws were satisfied with the description of the insurance. and I am not surprised, as it states: Enjoy complete peace of mind with Intasun holiday insurance with Eagle Star Group … It's one of the finest available — excellent cover for you and your family. It provides total security. The booking form asks for any special requests and the Shaws requested a cot for their young daughter. The request was subsequently shown typed on the official Intasun invoices. Finally, Mr. and Mrs. Shaw took confidence from Intasun's fair trading policy, commitment No. 5 of which states: We do not exclude or limit our liability to you for any loss or damage sustained by you as a result of the negligence of our employees or agents. No wonder that Mr. and Mrs. Shaw felt well prepared for the holiday.

They duly arrived at their destination and found the cot in place. They were informed that it had been arranged and paid for by the Intasun representative and that they owed her the money. Unfortunately, the cot was unsuitable for all but the youngest babies and young Emily fell out of it and cut her head badly on a metal strip on the marble floor. That caused a considerable gash requiring six stitches. The damage was bad enough but could have been much worse, and the little girl was caused considerable pain and suffering and the danger of a permanent scar. The Shaws were unable to obtain a more satisfactory cot and eventually received their money back from the representative.

On returning to the United Kingdom the Shaws first discovered that there was no personal accident insurance that covered that particular injury, so Mrs. Shaw wrote to Intasun, pointing out the danger of using such cots and asking that something be done about it to avoid even worse accidents or even a fatality, which is possible as a result of such an accident. At the same time. quite reasonably, she asked whether there was any possibility of compensation for out-of-pocket expenses, particularly for taxi fares to and from the hospital. She received a fairly full reply of 28 July 1986, in which Intasun expressed regret, but not much more. There was no mention of compensation and no liability or responsibility accepted for supplying the cot.

Mrs. Shaw wrote again saying that she thought such an important safety issue should be well publicised and mentioned that she had discovered that she could not address her complaint about Intasun to any form of official arbitration. That was a shock to her as she was under the impression that complaints against tour operators could go to arbitration. However, she discovered that complaints such as hers, relating to personal injury, were specifically excluded. Intasun replied that it had asked hotel managements to make cots as safe as possible but could only hope they would comply. In the same letter to Mrs. Shaw it said that the subject had already been publicised on the media in this country and that parents should be aware of the dangers. However, it went on to say: Intasun holidays are doing everything within our power to try and ensure that cots provided are safe for children and small babies. The Shaws received no satisfaction from the company so, at the end of August, they came to see me. Early in September I wrote to Intasun saying that I thought it had some obligation towards the family. The head of its legal services, a Mr. John de Vial, replied asking for more information and promised "urgent attention". I replied on 29 September and on 7 October Mr. de Vial, promised detailed comments "as soon as possible." On 2 January I asked for a reply. On 4 February I asked for a reply. It was a few days after that that I met an Intasun director at an Association of British Travel Agents seminar and mentioned the delay. I had still received no reply. On 27 February I met another Intasun executive and told him that my patience was now exhausted.

Miraculously, a letter appeared on the House letter board dated 27 February enclosing a copy of a letter dated 30 December. The excuse was that two separate letters had been sent to me, which apparently had not reached me. I cannot know whether that was true. Letters can be backdated. All I know is that the odds of two letters being sent to a Member of Parliament at the House and not reaching him are astronomical. Post Office officials confirm that. However, the reply offered no redress to my constituents and no acceptance of liability. Indeed, it specifically put the onus on Mr. and Mrs. Shaw. In a further letter, Mr. de Vial specifically said that the transaction was a matter between the family and the property management. That entirely ignored the part played by the Intasun representative. Indeed, the only supposedly helpful remark that Mr. de Vial made was to suggest that the Shaws should take action in the Greek courts, perhaps with the aid of the Shaws' European Member of Parliament. That is the position we have reached now.

I view Intasun in a poor light and I would certainly not book any holiday with the company. I give fair warning to those who do that there does not appear to be an effective response to complaints, nor can I promise an early reply to any letters that might be addressed to it.

Certain principles seem to have been raised by this case of a personal injury incurred while on holiday. First, the average holidaymaker taking out the normal comprehensive insurance is under the impression that he and his family are covered by such insurance. That is clearly not the case. The personal accident cover is clearly inadequate. Secondly, there is the fact that in the event of any accident there is no arbitration procedure for action against the holiday company as there is with other types of claim. Thirdly, the problem in such cases is that the only recourse would be action against the hotelier through the local courts. For all practical purposes that would seem to be out of the question except in the case of fairly serious injuries involving heavy damage. Fourthly, a great concern is the way in which tour operators seem to be able to skate round responsibility for any accidents that occur in accommodation that they have booked. Therefore, it is right to ask what can be done in the future. I believe that ABTA tries to be a reputable, public-spirited organisation, but, as an article in the Sunday press only yesterday reminded us, it is finding it impossible to persuade tour operators to agree on a common insurance policy.

However, millions of our fellow countrymen will go abroad on holiday this year. They will think they have adequate insurance, that the tour operators have some liability and that in the event of any dispute there will be arbitration. They will be wrong on all three counts.

What solutions are available? First, all operators should issue leaflets such as that issued by Horizon Holidays. This specifically mentions the danger of cots that may be unsuitable for young children. But even that excellent leaflet does not point to the very wide gap in insurance cover that is usually available.

Secondly, ABTA should re-examine the codes of conduct and wonder whether, if so large an operator as Intasun can act in the way that I have outlined, the codes are not strong enough. Equally, if ABTA considers that they are, should not Intasun be disciplined or shown up for the way in which it behaved?

Thirdly, if it is accepted that it will take some time to deal with this vexed question of personal injury and to devise a code of conduct that will deal with it, ABTA could recommend ex-gratia payments until a new code can be agreed that will make it impossible for a British tour operator to wriggle out of a liability that it might have to cover in this country.

That is the real point. Had there been a similar calamity in this country the Shaws could have taken effective action. That would have enabled them to claim compensation for their daughter.

I remind the House that the cot was mentioned in the original invoice, that it was specifically obtained by the Intasun representative and that the company representative paid for it and was reimbursed by the Shaws. Perhaps most importantly, surely the company's representative on the site was in a far better position to know whether the cot that was ordered was suitable for the young girl and in a far better position than the parents to make such a decision. I suggest that in this respect Intasun's response is misleading if not downright untruthful. In these circumstances, no British tour operator should be able to wriggle out of any responsibility.

I am aware that the whole question of personal accident insurance is very tricky, and the likelihood is that it is difficult to arrange cover for a child as young as this. But many people who will be injured will be in employment and would expect compensation on a weekly basis should they have an accident abroad. It is worth noting that statistically one is more likely to have an accident on holiday than at work.

I therefore look to ABTA to find ways in which such cover can be extended in a better manner than hitherto. A few years ago such cover was available as part of the normal holiday insurance. It has been cut out in recent years, presumably in order to save money.

ABTA has a great responsibility to put the tour operators' house in order. I accept that it does not have the kind of powers that my hon. Friend has, but, after all, it is supposed to be responsible for these codes of conduct and for ensuring that they are adhered to. I stress that in the meantime ex-gratia payments on a modest scale would do much to give confidence where, as I have shown, confidence is lacking at present. I therefore look forward to my hon. and learned Friend's reply. The holidays of many of our countrymen may well be ruined by accidents this year. Surely the time has come for us to try to ensure that any accidents that happen to people in future have a happier ending than the case to which I have referred tonight.

Photo of Michael Howard Michael Howard Parliamentary Under-Secretary (Department of Trade and Industry) 11:45, 27 April 1987

I congratulate my hon. Friend the Member for Wellingborough (Mr. Fry) on securing the opportunity of bringing this subject to the attention of the House. It is always distressing to learn of accidents befalling British families while on holiday abroad and particularly so when children are hurt. I sincerely hope that the daughter of my hon. Friend's constituents makes a full recovery and is none the worse for her experience.

My hon. Friend has made some interesting suggestions about protection for consumers who suffer personal injury on holiday. I am sure that he will understand that it would not be appropriate for me to comment on the details of any specific dispute between consumer and tour operator, which could be a matter ultimately for the courts. Existing laws and codes of practice already provide extensive protection for holidaymakers. However, the extent to which the law would apply in individual cases would depend upon the facts of each case and the terms of any contract or contracts which may exist. It may therefore be helpful if I explain the position in general terms.

In the first instance, holidaymakers have a significant measure of protection under the law. Although in the United Kingdom no laws specifically and exclusively govern rights and duties between those who provide package holidays and those who purchase them, the basic legal position is primarily governed by the ordinary, general law of contract and, in some circumstances, by the law of tort. The law is based upon common law and equitable principles developed over a long period by judicial decisions and modified from time to time by statutory provisions.

Package tours comprise a number of different elements, including travel, food and accommodation at a resort. The holidaymaker may enter into a contract with a tour operator to provide any or all of these services. The relationship between the parties is governed by the terms of their contract. The basis for the contract is generally set out in the booking conditions laid down in the tour operator's brochure. Contractual rights and obligations and any exclusions specifically provided for will vary from operator to operator. To the extent that the contract does not specifically provide for certain rights or obligations, terms or conditions may be derived from the Supply of Goods and Services Act 1982. This Act requires that a provider of services fulfils his obligations with reasonable care and skill.

The contract with the tour operator is not necessarily the only contract entered into as an integral part of a package holiday. It is not uncommon for the holiday-maker to enter into a particular arrangement on arrival at an hotel for specific facilities or services. In those circumstances the contract will be governed by local law, and the tour operator is unlikely to be a party to any such contract.

Exclusions from liability in specific contractual terms, or from terms implied under the Supply of Goods and Services Act, will be subject to the provisions of the Unfair Contract Terms Act 1977. Under the 1977 Act, terms which purport to exclude liability for death or personal injury resulting from a tour operator's negligence are void. Other clauses purporting to exclude liability for negligence in other circumstances are enforceable only if reasonable in all the circumstances. Liability may also arise in the law of tort if injury or loss is caused by negligent acts or omissions or results from negligent mis-statements by the tour operator or those for whom he is responsible

The remedy for breach of any of these provisions is by civil proceedings for damages. I know that the general public often feel inhibited from taking these grievances to court because of what the believe to be the lengthy delays and costs involved. May I remind the House that claims for £5,000 or less are heard in the county courts and that under the small claims scheme disputes involving £500 or less — a figure which is currently under review — are automatically referred for arbitration once a defence is filed. The scheme is intended to be as quick, easy and inexpensive as possible. To this end, procedures have been simplified to enable consumers to make these claims without employing a solicitor to represent them.

My hon. Friend mentioned the ABTA codes of practice. Those codes, one for the travel agents and the other for the tour operators, were drawn up in consultation with the Office of Fair Trading and prescribe rules to be observed by all member companies in arms such as description of holidays, booking conditions, alterations, cancellations and price variations. Failure to observe the code may result in the member company being fined or expelled from the association. The House will no doubt be aware that ABTA members provide the vast majority of package holidays from the United Kingdom. Under the ABTA rules, tour operator members are required to summarise accurately in their brochures any insurance facilities they offer alongside the holiday package. ABTA travel agents are required to draw the attention of their clients to insurance facilities and cover suitable to the clients' requirements.

In the event of a dispute, the ABTA code for tour operators provides for arbitration, but, as my hon. Friend said, the arbitration scheme does not extend to claims mainly or solely in respect of physical injury or illness or their consequences. The scheme is operated simply and cheaply on a documents-only basis, without the need for either side to employ a solicitor, and it is not surprising that claims related to personal injury are excluded, given the exceptional, and frequently complex, nature of such claims.

In disputes with insurers, there are two schemes whereby private policyholders can seek arbitration without having to resort to potentially costly legal action. The Insurance Ombudsman Bureau will investigate complaints about member companies where policyholders have failed to get satisfaction from the chief executive of the company concerned. The service is free to policyholders, and if a policyholder accepts the Ombudsman's decision, it is binding on both member company and policyholder. If the policyholder rejects the decision, he may pursue the complaint in the courts.

Some insurance companies subscribe to the personal insurance arbitration service which operates under the auspices of the Institute of Arbitrators, as in the case of the ABTA scheme. An independent arbitrator is appointed to consider a dispute, and both parties must agree to go to arbitration. The arbitrator's decision is binding on both parties and has the force of a legal award. If the policyholder is dissatisfied with the outcome, he does not have the right to litigation.

My hon. Friend contended that the average holiday-maker, in taking out the normal comprehensive insurance, is under the impression that he and his family are covered by such insurance. This is clearly not necessarily the case, depending upon the terms of the policy.

I have already outlined the obligations which ABTA imposes on its members, and the House will recall that member travel agents are required to draw their clients' attention to insurance facilities suitable to the clients' requirements and that tour operators must accurately summarise in their brochures any facilities that they offer. But most people would accept that it is in the consumer's best interest to have adequate insurance cover for his needs; and considerable effort has been made by Government, consumer organisations and the travel industry alike to get this message across to the holidaymaker. It is a basic principle that the consumer should satisfy himself that he has adequate insurance cover before he goes on holiday. He must therefore decide whether any policy which is on offer is adequate for any needs he may have or whether any additional cover may be required.

Holiday insurance arrangements have developed alongside the massive growth of the package foreign holiday industry. Much holiday insurance is similarly packaged for a mass market. Such insurance policies are intended to meet normal needs for a relatively short fixed period. The cover provided is standard, to keep administrative costs low, and the product competitive. Premiums, too, are low. A typical policy for a 10 to 14-night holiday might give cancellation cover, medical expenses abroad, hospital benefit, certain personal accident benefits and cover for personal baggage and money up to specific limits. It is also open to the holidaymaker to take out additional cover in a particular area, for example to cover the cost of legal expenses when making a court claim against someone who is legally liable for causing personal injury.

My hon. Friend suggested that ABTA should do more to see that holidaymakers are properly covered or at least fully understand the implications of what cover is available. The Director General of Fair Trading is currently conducting an exercise to monitor the effectiveness of the ABTA codes of practice.

The Director General of Fair Trading still has to discuss the survey with ABTA before publication of a report. He will explore whether it would he feasible or desirable to incorporate into the codes any obligation on the part of tour operators about safety standards in the accommodation and facilities that they provide.

Holidays abroad inevitably involve some element of risk, or at least the unpredictable. Therefore, it is only prudent that holidaymakers should satisfy themselves that they have adequate insurance cover. If they are in any doubt about the adequacy of a policy they should seek advice on taking additional cover to meet their particular requirements.

If things unfortunately do go wrong, I have drawn the House's attention to the considerable degree of protection for holidaymakers which already exists in law in the ABTA codes and in other arbitration schemes. The Government believe that the means whereby an aggrieved consumer may seek redress—either through the civil courts or by arbitration—are substantial. If consumers are unsure of their rights or of how to proceed in litigation, they should take advantage of the advice provided by citizen's advice bureaux or by their solicitor.

I have not heard in the debate any arguments that give me reason to think that the present level of protection for holidaymakers is inadequate or that the means of redress are unsound. There is always scope for improvement and the Government take a close interest in the monitoring carried out by the Director General of Fair Trading. I shall ask him to consider in the context of his current review the matter of exclusion from arbitration in the tour operators' code of practice of claims resulting from injury or illness. The answer to many of the problems that arise is not more controls but better use by the consumer of the remedies that already exist.

Question put and agreed to.

Adjourned accordingly at five minutes to Twelve o'clock.