18 March 2020
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Travel, insurance and the pandemic – more turmoil on the horizon?

Many are worried over the expected spike of the COVID-19 infection cases in Serbia over the coming weeks.

In light of the introduction of the state of emergency and the looming worsening of the effects of the pandemic, most are focused on preservation of their health, economic welfare and business. However, once the worst of the pandemic passes and life starts returning to normal, it is a question if the economy will be able to breathe a sigh of relief?

That is, however, highly unlikely, especially for companies in travel and insurance sectors, as they will find themselves subject to wide-spread liability claims.

Travel cancellations  

After the state of emergency measures which restrict general freedom of movement and travel were introduced, many hopeful travelers from Serbia had their travel arrangements turned upside down. Many already paid for their travel packages, signed the necessary documents, and their travel agencies issued vouchers required to take the journey. However, as the state of emergency was declared, travel agencies cancelled trips and travelers were left wondering what rights they have against travel agencies.

The rights of the would-be travelers in Serbia are regulated in the Contracts and Torts Act (“CTA”). In line with the CTA, travelers whose travel arrangements were canceled by their travel agency due to the COVID-19 pandemic before the commencement of the trip are entitled to full compensation of what they had already paid.

It is important to note that, in response to the pandemic, the national association of travel agencies “YUTA” announced on March 16, 2020 that all trips planned until May 15, 2020 are to be cancelled and that travel agencies will offer new travel packages to those affected by cancellations. Travel agencies  are supposed to reach out to individual customers and offer to arrange a new trip within one year following the date for which the cancelled trip was planned. Travel agencies will not require any additional payments from customers regarding the new trips – the cost of these trips will be covered from the value of what travelers had already paid.

Each traveler is free to accept or decline those offers. However, in case the traveler declines the offer, they may have substantial difficulties recovering the money paid to the travel agency. This is because travel agencies will face disrupted cash-flows due to the expected high number of cancellations and the fact that no new trips will be realized in the immediate future, both of which are likely to cause significant liquidity issues for agencies.

Insurance claims

The COVID-19 pandemic will also cause an increase in the number of claims submitted to insurance agencies for payment of sums guaranteed in personal insurance policies.

Most of these claims will be submitted by insured individuals who were infected and hospitalized after contracting COVID-19 and who had, as a result, suffered health impairment and bodily harm. The claimants are likely to argue that their insurance policy covers the peril of a viral pandemic and that they are, thus, entitled to the payment of the sum stipulated in the insurance policy.

Moreover, a (hopefully) smaller number of claims will be submitted by families of insured individuals who died as a result of the COVID-19 infection. They are also likely to argue that the insurance policy covers the peril of the pandemic, and that insurance agencies must pay the agreed sum.

However, is the COVID-19 pandemic a covered peril in terms of personal insurance policies?

The CTA, which governs the rights and obligations of parties to an insurance policy, does not provide a definitive answer. It only stipulates that perils must be specified in an individual insurance policy, and loosely authorizes parties to exclude any peril they wish from the scope of the policy.

Therefore, in order to determine whether or not claims submitted by insured persons who had suffered from the COVID-19 infection or those by families of insured persons who passed away due to the infection are justified, insurance agencies must review relevant insurance policies to determine if perils such as viral pandemic were covered.

It should be noted that insurance policies are considered standard form contracts, which means that their terms are generally non-negotiable, as they are prepared in advance by the insurance agency and offered to the counterpart on the “take-it-or-leave-it” basis. This is a significant point because such contracts are, in case of ambiguity, interpreted in favor of the “offered” party. In other words, if the insurance policy does not explicitly cover the peril of the COVID-19 pandemic, but covers similar perils of similar severity, claimants could reasonably argue that the COVID-19 pandemic was also covered by their insurance policy.


For more information, please contact us via covid19@geciclaw.com