Global ban on 737 MAX 800 triggers travel insurance conundrum

Our thanks to Peter Needham from EGlobal Travel Media for this summary of an emerging consequence of the world wide grounding of this aircraft model.

Insurance is unlikely to cover disruption to travel schedules in such unusual circumstances.

US President Donald Trump stepped in yesterday and ordered the grounding of 737 MAX operations in US territory. The US was the last country allowing the planes to operate, so the aircraft type is now grounded everywhere in the world. The fatal Ethiopian Airlines crash last weekend was the second of two 737 MAX 8 crashes in 19 weeks, with a total death toll of 346 passengers and crew.

For clients keen to know whether their travel insurance will cover the disruption to their travel schedules, the answer, in many cases, is “no”. It depends on the fine print and whether the policy covers “cancellation for any reason”. If it doesn’t, travel can get tricky. The temporary ban – of indefinite duration – has sent airlines scrambling to find replacement aircraft, disrupting travel itineraries.

From an insurance standpoint, the ban is unusual – because airlines are not to blame for it and neither is the weather. Depending on insurance policies, travellers may be covered for travel delays caused by the grounding, with coverage paying for meals, accommodation and transport while they’re delayed, up to the limit of their policy. “Those planes are grounded effective immediately,” Trump told reporters at the White House yesterday. “The safety of the American people, of all people, is our paramount concern.” Trump acted after the disclosure that the pilots of two US flights had reported to NASA incidents where their Boeing 737 MAX 8 planes had tilted down suddenly. The pilots suspected automated controls in the planes was the cause.

In New Zealand, Flight Centre told the New Zealand Herald that travel insurance coverage often excludes cancellations stemming from government regulations or edicts. A sudden change to a visa requirement is one example. A government decree grounding a type of aircraft could be another. New insurance will no longer cover 737 MAX disruption, as the grounding of the planes is now a ”known event” – rather like a volcano that has already started erupting. The 737 MAX 8 and 9 were grounded on 13 March 2019, so travel insurance policies purchased on or after that date will not cover delays or other losses caused by the grounding.

Apart from flight disruption, airport transfers, hotels and activities can be affected. Travellers who booked through agents are in a better position to cope. Travellers who made their own bookings may find themselves juggling a lot of changes in a short time. About 370 of the 737 MAX planes were flying worldwide.

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