It is a familiar scenario, one we’ve seen countless times. It could start with a casual weekend away riding bikes with your friends. It’s a success. Other friends, friends of friends, even customers want to ‘get involved next time’. Before you know it, your shop that previously offered repairs and spare parts now arranges trips, tours and training camps. Does this mean you need tour operator’s insurance?
We get it. Cyclists are demanding more from their local shops, cafes and clubs. You’re evolving your business model to suit those demands. It’s a natural progression. However, you shouldn’t let your insurance coverage limit your business potential.
What’s the issue?
Most basic business insurance policies will either exclude ‘tour operator’s liability insurance’ or not be intended to pick up such liabilities. A given retail policy for instance. Although your primary trade may not be a tour operator, UK regulations are applicable to anyone who creates and sells a ‘package’.
The old Package Tour Regulations 1992 defined a package as “the pre-arranged combination of at least two of the following components when sold or offered for sale at an inclusive price and when the service covers a period of more than twenty-four hours or includes overnight accommodation”:
- Transport
- Accommodation
- Another activity, other than transport or accommodation, that accounts for a significant proportion of the package.
For example, if your business had arranged a trip within the UK, Mallorca or further afield for an ‘all-in price’ that covers flights, accommodation and bike rental, you would have been liable should there have been an issue with any of the packaged elements. It doesn’t matter if the on-the-ground service was provided by a local company. You arranged it, you’re liable.
Similarly, even if you’d let people arrange their own flights, but you arranged accommodation, lead the rides and provided some minibus transfers, legally you were acting as a tour operator.
2018 regulation changes
On 1st July 2018, an update to the regulations came into force. This aligned the directive with modern-day booking habits such as online sales, low-cost airlines and peer-to-peer accommodation. In doing so, this extended the scope and definition of what constitutes a packaged tour. The definition for ‘other activities’ now encompasses services including, but not limited to, vehicle hire, sports events and sports equipment hire. Importantly, it need not include flights nor accommodation.
Do I need tour operator’s Liability insurance?
There are two scenarios where the answer is no:
- if the trip lasts less than 24 hours with no overnight accommodation
e.g. travel to and entry into a sportive lasting only one day
- if trips are occasionally arranged on a not-for-profit basis for a limited group, e.g. an informal winter-sun training weekend where one person books flights and accommodation with costs then shared equally among riders.
Beyond the scope of these situations, if you’ve arranged more than one component of the trip, the answer should be ‘Yes’. Tour Operator liability is not a legal requirement. Yet it is strongly recommended. Especially if your business intends to generate a profit from arranging the tour. If something were to go wrong, irrespective of whether it was your fault, the rider could seek damages from you. Typically, these claims fall under three categories:
- Loss of value – the difference between a 5* hotel and 3* hotel
- Out-of-pocket expenses – additional cost following a breach of contract
- Loss of enjoyment – compensation for distress or disappointment.
One of the costliest scenarios is if the accommodation providers you had arranged are deemed negligent. Were your riders to get ill from the meals provided, or catch a bug from an unclean pool, the costs can escalate. Particularly if they must take time off work.
You could also be liable for the negligence of suppliers. A claim could arise from something as innocuous as a slip in a hotel. Even if you insist your riders arrange their own travel insurances policies covering medical costs and repatriation, wider liability settlements often subrogate back to the tour operator.
You are also responsible for the guided rides your lead or offer. Should an injury or incident occur as a result of your negligence or route planning, your riders (or their travel insurers) could pursue you.
What else do I need to consider?
Financial Failure
If you are deemed to be a tour operator under the current legislation, it is a legal requirement to have financial failure protection in place. This protects client money in the event of your insolvency. There are a several options available to you. Read our Financial Failure blog here for more information.
Vehicle
Tour operator liability does not typically extend to your liability whilst providing transport or transfers to guests, in your own vehicles. This should be covered by appropriate motor insurance. You’ll need to make sure your business purpose is clear on the presentation.
Group Business Travel
If you have members of staff from the UK, working for you overseas, they’ll need an insurance policy that covers them for business purposes. Most standard travel insurance policies will exclude business travel. Your staff can either take this out themselves, of you can purchase a group business travel policy for everyone. This depends on the nature of your work and their employee status.
What solutions do I have for my tour operators Liability insurance?
- Check your current coverage – look in the list of exclusions for reference to tour operators liability insurance
- If it is excluded within your policy, ask your current insurer if it can be included
- If the answer is no, seek a stand-alone tour operators insurance policy in the short term, alongside your combined commercial policy
- Upon the renewal of your insurance, make sure you choose an insurer who can accommodate all of your business needs. This is the most cost effective solution.
Simply complete our tour operator’s insurance fact-find and we can advice you.
Still a little confused? We can help. Yellow Jersey Business understands the risks involved, and we’re here to give you the industry specific advice you deserve. Call 0333 003 0046 to speak to one of our experts, who can give guide you on the best route forwards for your business.