Dr. Christoph Hasche
What are the most important aspects to be considered by those handling passenger claims in the cruising business? Passenger Relation Executives, Passenger Service Managers or Claims Handling Officers struggle with the difficult task of keeping refund payments low, making passengers happy and providing lawyers with sufficient information to defend court cases. Christoph Hasche* gives some hints on how to arrange for successful claims handling.
All revenues earned by cruise ship operators come from the passengers. Only satisfied passengers guarantee the economic success of a[ds_preview] cruise line. Any disturbances in the relationship between the passenger and the cruise line have a direct influence on the financial result of the operator. Effective management of complaints is a very important aspect for marketing cruises. Retaining passengers instead of losing them and avoiding negative word of mouth is greatly influenced by the response to complaints. Above all, advanced complaints handling is the key to continuous improvement of quality. As passengers prefer avoiding the trouble of complaining, complaints can be considered to be the most reliable source of first hand information on important service defects and on the frequency with which failures occur. Competent claims management gives an excellent opportunity for learning and continuous improvement.
Dealing with the expectations of passengers is particularly difficult in a globalised market. As almost every cruise vessel hosts passengers from various countries, it is inevitable that complaints are raised by passengers from their various home countries. At least from the European perspective, it is obvious that a cruise operator may not rely on the assumption that his own national law and his own business terms will protect him sufficiently. The Regulation (EC) No. 593/2008 of the European Parliament and the Council of 17 June 2008 (»Rome I«) provides that whenever a passenger makes a booking in Europe he may insist that the law applicable in the country of his booking applies to the cruise contract. Consequently, the ship operator – in view of the internationality of the passengers on board – has to deal with the national laws of many countries. No ship operator may assume that his home court will protect him against claims by passengers raised under foreign laws. Furthermore, cruise companies which exclude or limit their liability in specific situations (such as theft or change of destination) in their business terms may be caught by surprise if such rules are declared null and void under an applicable foreign law. A cruise ship operator may not even assume that he can only be sued at the courts which are stipulated to be the only competent courts in the operator’s business terms. Many national laws allow a passenger to raise a claim against a cruise operator at his home court. If this home court then issues a judgement against the operator, this judgement is generally enforceable against the operator – even if his place of business is in a different country. This makes it necessary for operators to also observe the requirements and consequences of foreign laws.
By implementation of the Directive 90/314/EEC dated 13 June 1990 the European countries tried to unify the standards of package tours as well as the rights of passengers. The harmonisation of the European law is still far from being perfect. It may be said, however, that – in the absence of a force majeure case – a passenger may reduce the cruise price if he discovers that the cruise line does not deliver those services which were promised in the passenger contract, the catalogue, the website or in any other publications of the cruise line. In many jurisdictions this right of reduction is independent from any fault of the tour operator. Even if a tour operator cannot be blamed for a certain defect of the cruise, the pure existence of the defect entitles the passenger to reduce the price retroactively. As the passenger normally has to pay the full cruise price before commencement of the cruise, he may claim back part of the price after his return from the defective cruise. In addition, he might have a claim of compensation for his loss of travel pleasure if the defect of the cruise was substantial. This latter claim may be considered as immaterial damages.
Quality claims are normally raised individually depending on the very special circumstances on each individual cruise. Passengers who have a complaint approach lawyers after being frustrated with their tour or the services on board the cruise ship. Some may just start with a letter to the management but then later decide to pursue a lawsuit after not getting a prompt response. In addition, some who file complaints are those who feel their tour was not worth their money because of poor service, food and bad facilities. Common complaints relate to the quality of the accommodation, food, services, excursions or entertainment program. Whenever an element of the package which has been promised to the passenger was not in line with the contract, a passenger is able to raise a claim against the cruise ship operator. It has to be kept in mind that the passenger may not only expect to receive what has expressly been written in the passenger contract. In addition, descriptions and pictures in the catalogue and the website are considered to be promises of the operator and convert into legally binding obligations. Whether, if such obligatory services are not delivered, the passenger actually pursues his claim depends largely on his general satisfaction and approach. Some passengers do not even notice that certain elements of the cruise were not delivered or only delivered with poor quality. Others who take notice of a defect do not want to bother about it, in particular if they have the impression that the cruise operator tried his best to remedy or compensate for the defect. And then there are always passengers who already start on the first day of the cruise to actively search for any cause which entitles them to raise a claim. To reduce the proportion of those passengers who fight for compensation from the cruise operator after they have returned home it is of utmost importance to establish a well-organised and professional claim management system on board each vessel.
Thus, building a passenger-focused organization for claims handling is important. The way the top management treats complaints sends clear signals to all staff on how important it considers passenger satisfaction and retention. Pushing aside or ignoring complaints might reduce the internal visibility of defects but does not lead to increased passenger satisfaction. Instead, a well-advised cruise line operator should encourage dissatisfied passengers to complain. This could be done by proactively inviting passengers to react and by communicating how the organization can be contacted. Feedback cards in each cabin are well established tools to evaluate satisfaction and identify problems. Even if passengers do not report any problems, they should be asked explicitly whether they are satisfied. There should be an established routine to invite passengers to contact the organization and to ask if they wish the organization to contact them regarding a problem they have experienced or a question or other concerns they have.
A key driver of satisfaction or dissatisfaction with complaint handling is the response time. Solving complaints immediately is preferable in every case. Providing service employees and passenger relation staff with enough autonomy and authority to allow them to handle unforeseen problem situations such as complaints is a promising way to reduce costly legal disputes. The earlier a representative of the cruise operator gets involved in a passenger claim the better the chances that a legal dispute can be avoided.
Complainers not only demand a quick response but also appropriate corrective action to address the problem. Passengers judge whether the corrective action is satisfactory by three criteria: (i) The compensation: The passenger wants to be adequately compensated for the problem he has experienced (e.g. financial compensation, letter of apology, free work or repair, replacement, voucher). (ii) The sincerity: The passenger wants to be taken care of; he wants to be taken seriously. This requires well trained front-line employees. (iii) The follow-up: The passenger’s satisfaction with complaint handling can be increased by encouraging feedback from the passenger afterwards. Cruise line operators might wish to call or write to remind that the complaint was dealt with; they might communicate that corrective action has been taken. They may thank the passenger for the complaint and may even measure the passenger’s satisfaction with complaint handling.
From the legal point of view it is sometimes difficult to avoid a situation which is – at a later stage – understood as an admission that the alleged defect really existed. Claims handling therefore needs training and an understanding of the psychology of a passenger on the one hand and the legal consequences on the other. In general one could say that the purser – or whoever deals with the passenger complaint on board of the vessel – has to make clear that any attempt to remedy a defect of the cruise is made without prejudice as courtesy of the operator. As compensation for certain cases, cruise lines usually need to offer a refund, possibly plus a free tour incentive to their passengers. All these benefits to the complainer should be given against a carefully drafted written waiver of claims. If there are smaller defects one might be able to appease the passengers by small gifts or vouchers. In many cases it is much more the emotional disappointment than pure financial interests which causes a passenger to see his lawyer after the cruise. It is obvious that – even in cases where a defect can neither be denied nor remedied – a transparent and comprehensive information policy and a prompt compassionate though professional response to such individual disappointments may solve the problem at low cost.
If the dispute cannot be settled amicably during the cruise or directly afterwards, the cruise line operator should be well-prepared for a court case. Whether it is a major personal injury case, a class action or just a small defect of the cruise – there is no choice but to defend such case properly. This requires a thorough fact-finding exercise. The booking documentation, written evidence that the passenger knew of and accepted the operator’s general business terms, the catalogue, log book extracts, the Passenger Ship Safety Certificate of the vessel, certificates of the classification society, photographs of the cabin or of other details of the vessel, work slips or records of repair personnel, floor plans with dimension, any pre-trial correspondence, written statements of the purser or other crew members and feedback records might be of importance and should be available promptly upon demand of the lawyer who handles the matter for the cruise line at court. It is noteworthy that under certain jurisdictions a passenger may, even if there were defects during the cruise, not ask for a reduction of the fare if he failed to immediately notify the defect to the cruise line (or its representative) for its remedy during the cruise. The law requires that the cruise line must be given a chance for an immediate rectification of any deficiency before a passenger may raise a claim. Thus it is very important to keep a conclusive record on board evidencing which passenger complained about which deficiency at which particular time and thereby, as converse evidence, which passenger failed to do so.
The possibilities of avoiding liability for safety-related claims, such as slip-and-fall cases, other personal injuries, loss of luggage, damage to property, etc. are comparably remote. A passenger may raise claims against a tour operator, i.e. the cruise line, if he is able to prove negligence or intent by the operator. Many national laws assume negligence of the operators as a consequence of the legal duty to maintain safety. Also the owner of the vessel may be liable. But both the operator and the owner may reflect on the limitations of liability as stipulated in the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974 and the related Protocol of 1990. Even if this Convention and a liability insurance provided by a P & I Club or other insurer might give some comfort, it is of utmost importance for any litigation lawyer who is to defend such case on behalf of a cruise line or ship owner, to be provided with supporting facts and documents. That requires strict rules on board: Any accident – even minor ones – should be reported promptly and comprehensively. A detailed written report, statements of witnesses, and notations from the files of the ship’s medical personnel should be prepared as promptly and in as much detail as possible. Personal injury court cases do not normally involve complicated legal questions. Mostly, it is the prompt availability and persuasiveness of the facts which make it a won or lost case.
It is much more difficult and economically sensitive to deal with situations which affect the entirety of the ship and thus all passengers. Voyages might be cancelled due to technical problems, ports may turn out to be inaccessible, weather conditions might force a change to the planned route. All these events might result in claims of the passengers. The same applies to epidemic diseases (e.g. Noro virus) on board a vessel and – much more dramatically – a marine casualty or piracy attack. These events require a strategy plan on how to deal with the passengers. Evacuation plans, fire drills, disease management programs and other legally required or advisable emergency plans are most valuable and important to adhere to. But there should also be plans on a less dramatic level as the financial consequences of any change of the cruise could be substantial. These plans should reflect the legal rights of the passengers under their respective jurisdictions as well as marketing aspects. In view of the fact that cruise lines benefit more than other tourism sectors from repeaters it is essential to keep the passengers as satisfied as possible. This again requires prompt and comprehensive information to the passengers and transparent rules on compensation and refunds. Cruise operators might even consider immediately sending a representative from the head office to the vessel in order to hand over cheques to the passengers – inevitably against signing a claim release. In order to settle disputes before they have developed into a major legal problem the cruise line should be pro-active and arrange for a passenger claim emergency plan which covers the different scenarios which may occur. Even if the safety of passengers, crew and ships certainly has priority in case of a casualty it is worthwhile to investigate and stipulate beforehand how to best handle complaints in case an entire cruise has to be cancelled or substantially changed.
But it is not just the relationship towards the passenger which has to be properly organized. A cruise line operator also has to make sure that he is able to take recourse against his service provider as far as he purchases services from other sources. Wherever a cruise ship operator is charterer but not owner of the cruise ship, he might wish to set the conditions for possible recourse claims against the ship owner. Furthermore, recourse actions might be possible against management or crewing companies if their services are the reason for the passengers’ claim. The possibilities to be indemnified for the payments which the operator has to make to a passenger are dependent upon the facts but also on the terms of the charterparty, the management or the crewing contract. These contracts should unmistakably clarify the responsibilities among the parties for all aspects which have an impact on the passengers’ cruise. This requires very careful contract drafting. In the charterparty the owner should not only guarantee to provide a seaworthy cruise vessel. The management contract should not only describe the main services to be provided to the operator. The contract clauses should also require the owner, manager and crewing agent to fully cooperate with the operator in defending passengers’ claims. It should be agreed that the owner, manager and service provider has to reimburse the operator for all damages and losses (including legal costs) which he suffers from any misrepresentation and any failure to follow the operator’s lawful instructions. Depending on the question of who arranges for the nautical and technical crew, the passenger’ service staff (purser, receptionists, cleaning etc) and for the food & beverage personnel in the kitchens, restaurants and bars, the failure of such staff members to provide the corresponding services has to result into the liability of the owner, charterer or service provider.
The drafting of the underlying contracts should not be done without the input of those who deal with the claims of the passengers. Only if the experiences with the passengers are monitored, feedback questionnaires are evaluated and reasons for refund payments are analysed, the cruising operator is able to improve the quality of the cruises by establishing corresponding obligations of the services providers. At the end of the day, it is this improved quality which reduces passenger claims and the need to handle these.
Dr. Christoph Hasche
