Maybe you missed it but last week news came from several sources that Club ABC Tours of Bloomfield, NJ apparently went out of business. Club ABC Tours was a veteran tour organization and at one time was one of the largest tour companies located in the New York metropolitan area. Like many tour companies they offered a specially designed package of travel insurance to their customers through TripMate, a Kansas City, MO based travel insurance administrator. Like most tour operator plans, their plan did not provide protection for their own “default”. Default coverage is found in most third party travel insurance plans as part of the basic trip cancellation and interruption coverages.
Ironically one of the coverages offered by Club ABC’s plan was “cancel for any reason” which at first glance might offer some “default” coverage, however, “cancel for any reason” coverage offered by tour operators is usually is self-insured by them and therefore when they “default” it is usually due to financial reasons which means they won’t have the funds to guarantee the benefit. In Club ABC’s case it appears that it was a combination of self-insurance with claims administrated by TripMate and to clarify coverage they included the following limitation:
“ 2) the failure of Club ABC Tours to provide the bargained-for Travel Arrangements due to cessation of operations for any reason.”
What recourse is available to consumers who have booked a future trip through Club ABC Tours or one of their affiliates? The best advice is for those travelers who have charged their trip is to immediately dispute the charge in writing with their credit card company. Usually the credit card company is compelled to remove the charge. Unfortunately, many travel clubs require payment by check which is good for the club because it gives them almost instant use of the money without a merchant fee but in turn it is worse for the traveler because they become an unsecured creditor and with little hope of recovering their money.
This is an excellent example of why consumer advocates have been advising travelers not to buy travel insurance directly from their tour company or cruise line.