TD Insurance reaches $5.1 million settlement in pandemic related trip cancellation class action

An insurance division at one of the country's largest banks has agreed to settle a $10-million class-action lawsuit accusing it of wrongly denying COVID-related trip cancellation claims - and industry experts say it could spark a flood of similar deals.

The suit against TD Insurance, which provides credit card-based insurance policies, was filed on behalf of a Toronto man who'd booked a flight to Italy and Mediterranean cruise with his family. The man cancelled the cruise March 5, 2020, just days before the Italian government imposed a countrywide quarantine. The company initially rejected many travel cancellation claims because most airlines had offered vouchers or credits for trips cancelled because of the pandemic, despite that condition not appearing in policies, the suit had argued.

In a deal reached after mediation between the two sides, TD Insurance agreed to pay out $5.1 million, including $300,000 in costs. The deal must still be approved at a court hearing in February.

A spokesperson for TD Insurance declined to comment, as did law firms acting on behalf of the man who initially filed the suit, Kevin Lyons.

Joseph Campisi, an adjunct professor at York University's Osgoode Hall Law School, said the proposed settlement is likely just the first of many against travel insurance companies stemming from the pandemic.

I'm expecting there will be a lot more cases like this, and this is a decent model for settling them," said Campisi, who specializes in insurance law.

Campisi estimated that 97 to 99 per cent of all insurance litigation ends in a settlement rather than going to trial.

For both sides, a settlement removes the risk. Sure, you could win. But it could take years, and the legal fees for a class action can be very high," said Campisi.

In addition to removing the risk of losing at trial, Campisi suspects there's a bigger picture motive for TD Insurance's decision to settle: Not messing up TD Bank's broader customer relationships.

There's a customer satisfaction motivation to this. They don't want to piss off their customers who have credit cards, mortgages and lines of credit," said Campisi.

Martin Firestone, president of insurance brokerage Travel Secure, says insurers have tightened up their policies since the pandemic's early days. COVID is now specifically excluded as a known peril" in trip cancellation policies, said Firestone. Insurers are also now adding a paragraph saying if vouchers or credits are offered, that counts as adequate compensation, meaning insurance claims will be denied, he added.

It used to be that if you bought your trip cancellation (insurance) and you had to cancel the trip for a contractually-valid reason, if you were offered a credit or a voucher, you didn't have to necessarily accept it. You could say I don't want it, because I don't know when I'm going to get away again.' Or quite frankly, the money's better in my pocket,'" said Firestone.

The proposed class-action settlement could prove to be a model for other would-be travellers whose claims were rejected by other insurers, Firestone said.

I think this settlement could set a precedent going forward, with respect to anyone else who didn't get their money back," said Firestone.