No, the Insurance Company Is Not Looking for a Loophole

Why travel insurance purchased after a strike announcement cannot cover a risk that is already known

CBC’s Travel Insurance Story Sparked a Familiar Reaction

A recent CBC News article examined what happens when travellers purchase trip cancellation insurance after a possible airline strike has already been announced. The subject produced a familiar reaction in the comments: insurance companies are “evil,” they are always looking for loopholes, and they will use any excuse to avoid paying a claim.

That reaction may be emotionally satisfying, especially when someone is facing the loss of an expensive trip. It is also based on a misunderstanding of what insurance is designed to do. In this situation, the insurer is not inventing a technicality after the fact. The policy clearly distinguishes between an uncertain future event and a circumstance that was already known when the coverage was purchased.

The issue is not whether strikes are pleasant, fair or within the traveller’s control. The issue is timing. Insurance protects against uncertain future losses. It does not reimburse a loss that was already foreseeable when the policy was purchased.

What Is Actually Covered?

The public discussion can create the impression that a strike itself must appear in a list of covered events. That is not necessarily how trip cancellation insurance is structured. The relevant covered event may be the cancellation of the transportation itself.

For example, an insurer may define a covered risk as: “The cancellation of a common carrier for any reason other than bankruptcy, insolvency or quarantine.” A common carrier includes an airline. Under that wording, the insured event is the airline cancelling the flight, not the labour dispute as a separate covered cause.

That distinction matters because announcing a strike does not automatically cancel every flight. Negotiations may continue, the parties may reach an agreement, the strike may be postponed, or the airline may operate part of its schedule. Coverage responds when the labour situation results in the covered event, such as the cancellation of the traveller’s flight.

The Difference Between a Risk and a Known Event

Imagine that you book a non-refundable trip months before any labour disruption is announced. You also purchase trip cancellation insurance at that time. Weeks later, a union announces a strike date, the airline cancels your flight and your trip cannot proceed.

You purchased the insurance while the outcome was still uncertain. The later flight cancellation is the type of future event the coverage was intended to address. At the time you insured the trip, the potential labour disruption had not yet become a known event.

Now reverse the order. You book the trip without cancellation insurance. Later, a strike deadline is announced and your travel dates fall inside the affected period. Only then do you purchase insurance because you believe the airline may cancel your flight.

In the second situation, you are not transferring an uncertain risk. You are attempting to insure a problem after receiving information that makes the loss substantially more likely. The circumstance has moved from a general possibility to a known event.

The Exclusion Is Clear

This rule does not have to be invented after a claim is submitted. Travel insurance contracts may state the exclusion directly:

“Cancellation or interruption caused by or related to a circumstance known to you or any person purchasing insurance on your behalf before the date and time the trip is booked or before the date and time this Insurance is purchased, whichever occurs later, and which eventually prevents or interrupts travel as booked.”

The wording focuses on the later of two points in time: when the trip was booked and when the insurance was purchased. If the circumstance was already known before that later point and it eventually prevents or interrupts the trip, the resulting loss is excluded.

If the coverage was purchased before the strike announcement and the airline later cancels the flight, the insurance was in force before the relevant circumstance became known. If the coverage was purchased after the public announcement specifically because of the anticipated disruption, the known-circumstance exclusion applies.

There is nothing hidden about that distinction. It is written into the contract before the claim ever occurs.

Buying Insurance After the Warning Is Anti-Selection

Insurance is meant to protect you against unforeseen and unexpected events. You buy coverage before you know whether a loss will happen, and the insurer accepts that uncertain risk in exchange for the premium. The moment you try to buy insurance because a specific loss has become known or is now expected, the situation changes.

Purchasing insurance only after learning that a loss is likely is called anti-selection. It happens when the person seeking coverage possesses information showing that a claim is much more likely than it appeared before.

A straightforward comparison is property insurance. You can insure a house against a future fire. You cannot wait until the house is already burning and then purchase coverage for that fire. A driver can purchase collision coverage for future accidents, but cannot add it after a collision and expect the insurer to pay for the accident that has already occurred.

The travel example follows the same principle. A traveller cannot decide that cancellation insurance is unnecessary while everything appears normal, wait until a public strike announcement threatens the booked dates, and then expect a newly purchased policy to absorb that particular risk.

That would not be insurance. It would be a request for a payout after the problem had already become apparent. Insurance works by collecting premiums while it is still uncertain which policyholders will experience a loss.

Why the Purchase Date Matters

The purchase date is not an administrative technicality. It determines whether the risk was still uncertain when the coverage began.

A labour dispute may exist in the background without creating a specific threat to a particular trip. Once a strike date or potential disruption period is publicly announced, travellers with flights during that period possess new information. From that point forward, insurance related to that situation is being purchased with knowledge of a specific threat.

This is why trip cancellation insurance is most useful when it is purchased when the trip is booked, or at least before a specific threat becomes known. Waiting until the news reports that a trip may be affected can mean that the circumstance causing concern is already excluded.

The airline or travel supplier may also have obligations to provide a refund, credit or alternative transportation. Those obligations are separate from the insurance question. The insurance contract addresses eligible losses after other available reimbursements, but it still cannot turn a known event into an unforeseen one.

This Is Not a Loophole

The conclusion is simple. This is not an insurance company searching for a loophole to avoid a legitimate claim.

If the insurance was purchased weeks or months before the labour disruption was announced and the airline later cancelled the flight, the traveller insured the trip while the risk was still uncertain. The common-carrier cancellation is the covered event.

If the insurance was purchased after the strike announcement because the traveller feared that exact cancellation, the policy’s known-circumstance exclusion applies. The contract clearly excludes cancellation or interruption related to a circumstance already known before the trip was booked or the insurance was purchased, whichever happened later.

The word “strike” does not need to appear as a covered cause because the insured event is the cancellation of the flight. The insurer does not need to create a new technicality after the fact because the exclusion for known circumstances was already clearly stated in the policy.

Insurance covers the unexpected and unforeseen. It does not allow someone to wait for a public warning, buy coverage because of that warning and then demand that the known problem be treated as though nobody could have anticipated it. That is not a loophole. It is the basic distinction between insurance and a guaranteed payout.

Pedro Diaz Ramos can help you review travel insurance before your next trip, understand when trip cancellation coverage begins and identify exclusions that could affect your plans before you purchase coverage.