Good Policy: Prepare for the Worst

It is critical to regularly review any policy coverage to assure that everything is up-to-date and the amounts are adequate.

If you book a family on a luxury African safari but get an angry phone call from the client because while three airline tickets for the family are fine, the fourth has a wrong date and the airline won’t accept that, it’s an “aha” moment. Similarly, you might book a client into a hotel, but now they’ve e-mailed you that there is “round-the-clock construction noise.” Worse yet, they were attacked by bedbugs. They’ve already changed hotels and are threatening to sue.

Even the best travel agents can make a mistake, or clients may believe a problem is the agent’s fault. For those “oops” moments, professional liability insurance (often known as “errors and omissions”) can help protect the travel agency when something goes wrong with client arrangements, even despite the agent’s best effort. Many host agencies, consortia and franchise groups offer such insurance for agents.

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“We require our agents to have E&O insurance; if they are a single agent, they can be added under our policy with BerkelyCare, but if they are multiple they must take out their own,” says Claire Canady, manager of North Carolina operations, Travel Experts, a host agency group.

Why should clients absolutely have it? “If a trip does not go well, the client is injured or killed, or there is any reason that the client decides to sue, then the agent and agency is usually named along with the supplier and can be held responsible.” She said the policy helps with legal costs the agent and agency may face. Premiums are based on sales volume.

“Cruise Planners provides up to $1 million in errors and omissions (E&O) coverage for our franchisees and their associates,” says Tom Kruszewski, CFO and co-owner of Cruise Planners, an American Express Travel Representative. “Since we are a franchise business model, it’s important for us to protect our agents whenever and however we can.”  Kruszewski also encourages agents to talk to their local accountant or insurance advisor about any additional protection that may be required, as insurance regulations and requirements vary state by state.

It’s also critical to regularly review any policy coverage the agency has, just to assure that everything is up-to-date and the amounts are adequate. CruiseOne and Cruises Inc. posts a copy of its insurance certificate on Intranet sites for the agency groups. “We take protecting our owners and agents very seriously,” stresses Debbie Fiorino, senior vice president of CruiseOne and Cruises Inc. She says the groups are constantly evaluating the errors and omissions policies provided for their agents. “In fact, we are in the middle of this process as we speak,” Fiorino says.

Emerging Trends

“There is still the traditional business liability protection which pays medical bills, defense fees and court judgments for business-related law suits,” Fiorino says, but she also notes that as small businesses and home-based businesses have become the “new norm,” a plethora of new insurance products have hit the marketplace.

In some cases, homeowner’s insurance can help protect a home-based business. How? “These would come in the form of additional riders to your existing policy and may include business property, unlimited income, valuable papers and accounts receivable,” says Fiorino. But policies vary widely, so check with the home’s insurer.

Amber Blecker, owner of a home-based agency in Aurora, CO, has her E&O insurance through CruiseOne. “I also have liability insurance through my homeowner’s policy and some of my equipment is individually listed on the policy,” she adds. But she notes that she has no additional riders as no single piece was over the value required by the insurer for separate riders.

Errors and omissions insurance helps with legal costs the agent and agency may face if a trip does not go well.

Steve Hirshan, senior vice president of sales support for Avoya Travel, says that most of his company’s independent agencies are home-based, so the firm focuses mainly on E&O insurance. “As a host agency, we do provide limited errors and omissions insurance to all of our independent agencies,” Hirshan says. But Avoya also highly recommends that the agencies have their own errors and omissions policy.

Additional Risk Prevention

Another tip? “In addition, we recommend that travel professionals set up their businesses as a corporation or LLC because of the additional risk prevention that the company models provide,” Hirshan suggests.

Those with brick-and-mortar businesses certainly need commercial property insurance covering fire, smoke, wind, hail storms, vandalism or burglary. Business owners may not realize that typically hurricane protection and flood insurance are not routinely included. Talk to the insurer about those. For information on flooding, visit the National Flood Insurance Program site at; travel agency buildings don’t have to lie in a flood zone to have flood damage.

Bundling of insurance services can be a cost-saver. For example, a business owner policy package might include business interruption insurance, property insurance, vehicle coverage, liability insurance and crime insurance. Often, agency owners can pick and choose elements based on what’s needed, eliminating or supplementing what the consortia/host agency/franchise group has.

Other Considerations

If the agency takes credit cards or gathers personal client information to purchase services (such as an airline ticket), a data-breach policy or rider may be good protection for agencies. Businesses that issue W-2s to employees need Worker’s Compensation Insurance.

On the auto side, commercial automobile insurance can cover company business-only vehicles, but employees who drive their personal vehicle to a meeting with clients or community event, and have an accident, could put the agency at risk—if their auto insurance is inadequate or nonexistent. Non-owned automobile liability protection can often be added to a business owner’s policy.

When it comes to insurance, prepare now. Agency owners should review business coverage, ask questions of the insurer and make sure policies are up-to-date and adequate. Definitely, consider the financial fall-out from any “catastrophic” events and take the necessary steps to ensure that your business can weather the storm.

Insurance Resource Sites

Here’s a sampling of online resources related to business insurance for agents to use.

* Insure U for Small Business is operated by the National Association of Insurance Commissioners (NAIC), an organization of insurance regulators. Here you’ll find helpful tips, a small business insurance quiz and a link to check consumer complaint rates for insurance companies.

* The American Insurance Association has sections on its website for “Insurance 101,” property insurance basics and an insurance glossary.

* The U.S. Small Business Administration also offers insurance information, including a place to enter a zip code or click on a map to find the local SBA district office and other local or state resources.

* The Insurance Information Institute’s site is set up to help consumers understand insurance, including business insurance topics.

States regulate insurers within their borders, so most state governments have websites that explain requirements and provide services to small businesses.