AIG Failed to Refund Unearned Premiums for Travel Insurance on Canceled Trips, Lawsuit Alleges

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American International Group, Inc. (AIG) and subsidiary National Union Fire Insurance Company of Pittsburgh, PA face a proposed class action over their alleged failure to refund portions of travel insurance premiums covering post-departure perils when a trip is canceled prior to departure.

The 39-page case contends that when a policyholder cancels their trip prior to departure, the insurers face no risk of having to cover post-departure perils such as trip interruption, medical emergencies that occur during a trip or lost, stolen or damaged baggage, and thus have not earned the premiums for these types of coverage. Nevertheless, the defendants pocket this unearned money when they refuse to refund any portion of a policyholder’s premiums after a trip is canceled, the lawsuit alleges.

“AIG Travel has an obligation to refund any unearned portion of the gross insurance premium that a travel insurance policyholder paid in advance of his trip,” the complaint states. “This includes any portion of the premium paid for delineated post-departure coverages that are never provided, and the risks underlying those coverages Defendants never assumed, because the trip never departed.”

The plaintiff, who purchased travel insurance policies to cover a 10-day trip to France scheduled for October 2020 and a cruise scheduled for November 2021, claims to have been cheated by the defendants when they refused to refund any portion of his premiums after the two trips were canceled. Per the complaint, the plaintiff seeks reimbursement for himself and similarly situated policyholders for lump-sum travel insurance premiums that fail to distinguish between pre- and post-departure coverage, and thus overcharge policyholders when their trips are canceled.

According to the case, AIG sells various travel insurance packages that include coverage for both pre- and post-departure risks. Coverage for pre-departure risks, which are limited to trip cancellation and trip exchange, begins at 12:01 a.m. on the day following payment to the defendants and expires upon cancellation of the trip or at 11:59 p.m. on the day before the departure date, whichever occurs first, the suit explains. 

Post-departure benefits, on the other hand, include all other coverages in the policy and are effective beginning at 12:01 a.m. on the scheduled departure date and ending either when the insured reaches the return destination, on the scheduled return date, when the insured arrives at their destination for a one-way trip or on the listed return date on the application, whichever is earliest, the suit says.

By nature of this coverage, the defendants only assume risk to cover post-departure events after the trip begins, the lawsuit argues. Thus, post-departure coverage has no value to the insured if their trip is canceled, and the insurers therefore have no right to keep the premiums paid for this type of coverage in the event of a trip cancellation, according to the suit. The lawsuit claims that although AIG is able to calculate the pro-rated portion of premiums paid for post-departure coverage and thus has the ability to refund policyholders for these benefits, it refuses to do so.

According to the case, after the plaintiff canceled his 10-day trip to France and Sixthman cruise, he requested premium refunds from the defendants for his travel insurance policies. AIG allegedly refused to issue the refunds given the requests were made outside of the company’s “Fifteen Day Look” period, which requires policyholders to submit refund requests within 15 days of the policy’s effective date, the suit says.

The plaintiff alleges that although the defendants offered him a travel insurance credit voucher, the voucher expires in August 2022 and contains “unreasonable restrictions.”

The lawsuit looks to represent anyone in the U.S. who, during the applicable statute of limitations period, purchased through a single, lump-sum premium a travel insurance policy from the defendants that included both pre- and post-departure benefits for a trip that was canceled prior to the trip departure date.

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