Hoping to better understand the legal issues impacting travel advisors today, I decided to talk with a bunch of lawyers.
Perhaps not surprisingly, all of the attorneys I spoke to had a great deal to say, but what emerged during each of those discussions was a singular framework of legal concerns that advisors should be seriously considering.
Some topics that came up again and again were the importance of creating a corporation or limited liability company (LLC) to protect personal assets, and the need to draft comprehensive terms and conditions (TCs) agreements for clients. Other concerns that advisors should address include issues such as insurance, credit card fraud and how to respond to customer questions about safety.
Another frequently mentioned bit of legal advice for advisors that I heard from attorneys was to do exactly what I was doing — talk to a lawyer.
You’ll be far better served spending a little bit of money upfront, rather than trying to hire an attorney when a problem arises.
“I know attorneys can be expensive, but they are a lot less expensive when you [talk to them] as a preventative measure instead of doing it when a problem arises,” said Lara Owens, who is a practicing attorney and a travel advisor at Destination Fun Travel, a Travel Leaders affiliate based in Louisburg, Kan.
Lawyers can help set up your business, so you have protections in place, Owens says.
“So, you know what to do with a chargeback,” she continued. “So, you have good terms and conditions that you have clients approve. You’ll be far better served spending a little bit of money upfront, rather than trying to hire an attorney when a problem arises.”
Protect Your Assets
Longtime practicing attorney Peter Lobasso, who is senior vice president and general counsel for the American Society of Travel Advisors (ASTA), told me that too many independent travel advisors are still operating as sole proprietors.
“You do not have the benefit of limited liability unless you form either a corporation or an LLC,” Lobasso said. “And forming an LLC is very easy to do. It generally doesn’t cost very much, and it doesn’t create a whole lot of complication to your business, but it goes a very, very long way in protecting you.”
Too many advisors are operating as sole proprietors.
Credit: 2023 Jirapong/stock.adobe.comConnecticut attorney Jeffrey Ment, who worked formerly as a travel advisor, now represents many travel advisors and businesses. He agrees with Lobasso, suggesting that travel sellers operating as sole proprietorships should really reconsider that decision.
What are the things I should do to make sure I’m as risk efficient as possible?
Ment says advisors should ask themselves: “What are the things I should do to make sure I’m as risk efficient as possible?”
“Clearly, step one is insulating their personal assets by establishing some kind of legal entity, most notably an LLC or maybe an S Corporation,” Ment said. “There are different reasons you might do one versus the other. Simplicity would argue in favor of the LLC.”
Ment was also quick to encourage advisors to insure their businesses, and he noted independent contractors working with a larger agency that provides errors and omission (E&O) insurance coverage should be sure they fully understand that policy.
I tell agents all the time, ‘It is not a panacea to be covered by your bigger agency’s E&O policy unless you know the terms of it.’
“I tell agents all the time, ‘It is not a panacea to be covered by your bigger agency’s E&O policy unless you know the terms of it,’” Ment explained. “Maybe you end up buying your own E&O policy with a half-a-million-dollar limit and a $500 deductible for $800. You wouldn’t want to be told by your bigger agency, ‘Hey, that claim you had filed against you resulted in our $10,000 deductible being eaten up, and now you owe us $10,000, or we’re just going to withhold the next $10,000 of your commissions.’”
Craft Detailed Client Contracts
Formerly an entertainment industry attorney, Thomas Carpenter launched New York City-based Huckleberry Travel, now a Uniglobe and Virtuoso affiliate, with his husband in 2017. The full-service agency works regularly with luxury travelers, and Carpenter also represents more than 1,200 small travel agencies and tour operators as an attorney.
If there’s seaweed on the beach, and it smells horrible, that’s not the travel advisor’s fault just because they booked the resort. If somebody slips and falls on a wet marble floor at a hotel and breaks his leg, that’s not the fault of the travel agency.
“It’s really crucial that every advisor has a terms and conditions document,” he said, noting those contracts help manage the risk of operating a travel agency. “That’s the No. 1 thing I do for people. If there’s seaweed on the beach, and it smells horrible, that’s not the travel advisor’s fault just because they booked the resort. If somebody slips and falls on a wet marble floor at a hotel and breaks his leg, that’s not the fault of the travel agency.”
Carpenter noted travel is also, of course, intensely regulated, so there are many alerts advisors are required to make, and regulations with which they are mandated to comply.
“A terms and conditions document that is contractual in nature and where your clients are actually agreeing to it, can really take you off the hook for a lot of those things you would otherwise be responsible for,” he said.
Destination Fun Travel’s Owens said she crafts TC agreements that include as much detail as possible about the trip she’s arranging for her clients.
“Flight, resort, room type — those are the big components you want people to approve,” Owens explained. “The big-ticket items, the ones where you don’t want to get stuck holding the financial bag, that’s what you want to be putting into that proposal, and the more detail, the better. ... That really detailed proposal with TCs will save travel advisors more times than not.”
The big-ticket items, the ones where you don’t want to get stuck holding the financial bag, that’s what you want to be putting into that proposal, and the more detail, the better.
Owens noted her agency requires that clients agree — typically via email — to detailed trip proposals featuring all the agency’s TCs before taking payment for an initial deposit, which she said can also help prevent certain instances of credit card fraud.
“It can make some of those people considering fraud think twice, and they’ll ghost you; they’re going to go away because they don’t want to take those extra steps,” Owens said, noting that documentation is also crucial in chargeback investigations. “Personally, on my own bookings, even before I run final payment, I always say [via email], ‘I want to get that authorization. May I proceed with that payment?’ When I get ‘Yes, you may,’ then I do it. I want that in writing before I process their credit card, so there’s not any confusion.”
ASTA’s Lobasso said his organization currently provides its members with a free example of a TC agreement that’s been crafted specifically for travel advisors.
“We are also rolling out a brand-new and improved template TCs statement for travel agencies to use,” he added, noting the revised template should be available “in the coming months.”
ASTA also offers members a course, entitled Agency Relationships and the Law, which covers a range of legal issues impacting travel advisors and their businesses.
“We go into great detail about what it means to be an agent,” Lobasso said of the course. “What is the duty of care? Am I under a fiduciary duty? What potential liability am I exposed to?”
How to Answer Safety Questions
Travel industry attorney Ment said the queries advisors routinely field from clients about the safety of a vacation destination should not have “yes” or “no” answers.
The answer has to be, ‘Safety is something that you have to decide on your own, traveler, because I can’t tell you what your safety will be like when you get there, and I can’t tell you what you are comfortable with in terms of risk.
“Travel agents are often asked, ‘Is it safe to go there?’ and that is a very sticky question,” Ment explained. “The answer has to be, ‘Safety is something that you have to decide on your own, traveler, because I can’t tell you what your safety will be like when you get there, and I can’t tell you what you are comfortable with in terms of risk.’”
Ment mentioned a pending Texas lawsuit in which the widow of fireman Elijah Snow, who died while on vacation in Mexico, is suing the travel agency that booked the trip, alleging Let’s Go On Vacay, LLC failed to sufficiently warn the Snows about the dangerous criminal environment in Cancun.
“The agent is in a very strong position based on her terms and conditions and based on the facts of the story,” said Ment, who is not involved in the litigation. “Travel agents cannot be responsible for a crime unless they somehow orchestrated the crime.”
ASTA’s Lobasso, who is also not involved in the Texas litigation, agreed that the agency appears to be on relatively solid legal footing.
“There are a lot of different factors here that, in my view, would make it unlikely that the advisor would be held liable,” he said. “But our standard advice at ASTA in a case like this is always to direct your client to an objective, third-party source of information. Typically, the one that we always say is the go-to is the U.S. State Department’s website.”
Like Ment, Lobasso said agents are not in a position to make recommendations about whether a traveler should visit any particular destination, because everyone’s risk tolerance is different.
“You furnish them with that objective, third-party information, and you leave the decision up to them,” Lobasso said. “Obviously, there’s no guarantee you’re not going to get sued, but certainly, it’ll put you in a better position to have a favorable outcome if you are sued.”
Attorney and Huckleberry Travel owner Carpenter noted the pending Texas lawsuit is a terrific example of how an ongoing relationship with a lawyer can be extraordinarily beneficial for travel advisors.
“I’ve had agency owners who have had horrible, horrible things happen to their clients while they’re traveling,” Carpenter said. “But because the agency owner reached out to me quickly, and because we responded in a way that was calculated to keep them out of the inevitable lawsuit, it made it a lot less expensive for them to deal with the aftermath.”
