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Federal Register / Vol. 86, No. 162 / Wednesday, August 25, 2021 / Proposed Rules
conditions, such as bad weather, in an effort to avoid a delay being deemed as nonperformance. PVA remarks that the proposal for a 24 hour delay to constitute nonperformance appears to be based on a U.S. Department of Transportation policy regarding delays in scheduled commercial airline transportation and is not an appropriate standard to apply to a scheduled cruise.
The Surety & Fidelity Association of America SFAA
SFAA believes the proposed definition of nonperformance is overly stringent and will increase the number of claims against this obligation, thereby increasing the likelihood of exposure under the surety bond. SFAA further states that a standard of requiring refunds if boarding is delayed by 24
hours would add a significant burden to PVOs in terms of an increase in full refunds issued, as well as compliance costs to operationalize procedures to process refunds based on a 24-hour delay to the voyage. SFAA contends the 24-hour delay standard for nonperformance would increase nuisance claims against PVOs, which would impact how sureties underwrite the obligation. SFAA believes the proposed definition of nonperformance would cause sureties to require PVOs to have more cash on hand or larger lines of credit, and ultimately decrease the number of PVOs eligible to receive a surety bond. SFAA recommends changing the definition of nonperformance to a minimum of 72
hours.
SFAA also expresses concern over uncertainty about what is covered under the bond in response to a claim based on the new definition of nonperformance. Specifically, SFAA
argues that a passengers unilateral cancellation should be excluded from coverage under the bond. SFAA also requests clarity as to what passenger expenses are covered as a result of PVO
nonperformance.
B. Process for Obtaining Refunds From PVO Instruments for Nonperformance of Transportation
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1. General Although the Commission regulations require certain coverage and terms to be included in financial responsibility instruments, the regulations do not include uniform procedures regarding how and when passengers may make claims for refunds against the various financial responsibility instruments.
The Fact Finding 30 Interim Report recommended that the Commission revise its regulations to make clear how
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passengers may obtain refunds under these instruments and include specific provisions related to such claims and the timing of refund payments.14
Neither part 540 nor the financial responsibility instrument forms provide specific instructions on how or when passengers may obtain refunds under a PVOs financial responsibility instrument. For example, the Guaranty Form Form FMC133A provides that Guarantor will make refund payments to passengers when: 1 The PVO and passenger enter into settlement agreement, approved by the Guarantor;
or 2 the passenger obtains a final judgment against the PVO and the PVO
does not make payment within 21 days.
Similarly, the suggested language for Escrow Agreements in Appendix A
states that an Escrow Agent will make refund payments to passengers when either: 1 The PVO provides written instructions to the Escrow Agent to make such payment; or 2 the passenger obtains a final judgment against the PVO, the PVO does not make payment within 21 days, and the Escrow Agent receives a certified copy of the court order.
The Fact Finding 30 Interim Report recommended and the ANPRM
requested comments on the following general procedure: 1 The passenger makes a request for a refund from a PVO
financial responsibility instrument when nonperformance has occurred;
and 2 the refund payment is made within a certain period, depending on certain conditions.15 The Commission anticipates that implementing these changes would involve amending the regulations in part 540, Subpart A and the language of the financial responsibility instruments forms to reflect the new procedure.
Summary of Comments Passenger Vessel Association PVA
PVA comments that while there is a business relationship between a PVO
and its financial responsibility instrument provider, no comparable relationship exists between the provider and the cruise ship passenger. PVA
believes the Commission should not attempt to create or force such a relationship. Instead, should the Commission go forward with establishing a process for a passenger to claim a refund for nonperformance of transportation, it should specify that the passenger must submit the refund claim directly to the PVO. The PVO would then be responsible to submit the claim to the financial responsibility
instrument provider, if the PVO agrees that nonperformance of transportation has occurred and that satisfaction of a claim is warranted.
The Surety & Fidelity Association of America SFAA
SFAA strongly believes that the PVO should continue to serve as the primary party designated to receive and handle claims submitted by passengers.
In a case of liquidation of the PVO, or if there is no response from the PVO, then claims could be submitted to the surety. SFAA maintains that sureties do not generally have the claims handling capability to process individual claims against the financial responsibility instrument. SFAA believes that implementing a system that allows a direct right of action against the surety bond without requiring a judgment will make claim handling more involved, expensive, and tedious. Further, SFAA
asserts that if sureties are designated as the direct claims handling entity with an investigatory requirement under the new regulatory regime, many will likely exit the market. SFAA believes that the net effect of the proposed changes would increase the cost of a surety bond, or a lack of availability of surety bonds. SFAA recommends two alternative approaches to the proposed process:
1 Claims be submitted directly to the Federal Maritime Commission as the obligee and beneficiary of said surety bonds, and the FMC may then submit verified requests for payment to the sureties based on its review of the claim; or 2 Claimants be required to obtain adjudication of its claim before submitting their claims to the surety.

2. Deadline for Submitting Refund Requests Under the Financial Instrument Commission regulations do not currently prescribe how long passengers have after a scheduled voyage to seek a refund from a PVO financial responsibility instrument. The Fact Finding 30 Interim Report recommended that the Commission specify that a PVO may set a reasonable deadline for passenger refund requests, but the deadline may not be less than six months after the scheduled voyage.16
The Commission included the following draft provision to reflect this recommendation:
A passenger must submit a request for refund no later than 180 days 17 after 16 Fact
Finding 30 Interim Report at 12.
clarity and ease of calculation, the Commission contemplates using a deadline of 180
days rather than six months.
17 For
14 Fact 15 Fact
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Finding 30 Interim Report at 1112.
Finding 30 Interim Report at 1112.

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