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Federal Register / Vol. 86, No. 162 / Wednesday, August 25, 2021 / Proposed Rules
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consideration the potential negative effects of the proposed definition of nonperformance raised by the commenters, particularly the period of time a vessel is delayed as it relates to the definition of nonperformance of transportation. SFAA proposed the definition of nonperformance to be a period of time greater than 24 hours, a minimum of 72 hours, to ensure PVOs are not inundated with claims. The Commission proposes to define nonperformance as when a passenger vessel operator cancels or delays a voyage by three or more calendar days, if the passenger elects not to embark on the delayed or a substitute voyage offered by the PVO. Adoption of the proposed definition will require corresponding changes to all financial instruments.
Due to the proposed definition of nonperformance of transportation and to ensure that passengers are indemnified for nonperformance of transportation, the Commission is proposing a change to require PVOs to report nonperformance of transportation events to the Commission semiannually. This reporting is necessary in order for the Commission to be responsive to the public and to provide adequate monitoring and statistical information on occurrences of nonperformance. Nonperformance of transportation events occurring between January 1 and June 30 would be reported no later than July 30 of the same calendar year, and events occurring between July 1 and December 31 would be reported no later than January 31 of the following calendar year.
B. Process for Obtaining Refunds From PVO Financial Instruments for Nonperformance of Transportation The Commission reiterates its position on the importance of a clear and consistent policy toward refunds from financial instruments in the event of nonperformance of transportation, in an effort to eliminate uncertainty on the part of passengers. The Commission therefore proposes changes to 46 CFR
part 540 by adding a Process for obtaining refunds from the financial instrument in the event of nonperformance by a PVO. This process would apply in a situation where the PVO claims procedure provides less than 180 days for submission of claims after nonperformance of transportation, and the passenger wishes to submit a claim after the PVOs deadline for submission has passed, the passenger may still seek reimbursement from the financial instrument after providing written notification to the PVO. This
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provides the passenger with up to 180
days to submit their claim, first to the PVO or, secondarily, to the financial instrument provider. If proper documentation is provided, the refund payment shall be issued within 90 days of submission of the claim to the financial instrument provider.
The Commission elected the period of 90 days for the refund payment considering PVAs comments which stated that smaller PVOs may be unfairly treated under the ANPRM
language. They cited an example wherein smaller PVOs were not subject to Centers for Disease Control and Preventions CDC No Sail Orders, but nonetheless they chose to voluntarily cancel planned cruises for safety reasons. In this example, smaller PVOs would be required to provide refunds in a shorter time period 60 days relative to larger PVOs 180 days. To address this concern, the NPRM proposes a refund payment, under a PVO financial responsibility instrument, to be made within 90 days of submission of claims to the financial responsibility provider, regardless of the reason for nonperformance.
Subsequent to receiving formal comments to the ANPRM, the Commission engaged in additional discussions regarding cost and availability of PVO financial instruments with representatives of financial instrument providers. It was indicated there likely would be an abandonment of the PVO program by many of the financial instrument providers due to the possible direct interaction with passengers and the lack of a formal judgement. The NPRM
proposes passengers first seek refunds from the PVO in order to minimize the direct interaction between passengers and financial instrument providers, and that the financial instrument providers would be permitted to require a formal court judgement.
The Commission is interested in receiving comments from industry stakeholders regarding the potential availability of financial instruments resulting from the proposed change to the definition of nonperformance, and on the proposed process of obtaining refunds from the financial instrument.
As discussed in this NPRM, comments received in response to the ANPRM
indicate a concern by some stakeholders that the proposed regulatory changes will constrain the current providers of financial instruments from continuing to provide such instruments to PVOs.
Commenters have stated that surety companies would be largely unwilling to act as the direct claims handling entity in cases of alleged
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nonperformance. The Commission is also aware of a concern that banks may view the new regulations as too burdensome and choose not to offer PVOs the option of an escrow account to satisfy PVOs financial responsibility requirement. In addition, the increased claims activity of commercial providers of travel insurance during the pandemic may influence their determination whether to offer financial instruments to PVOs. Subsequent to receiving formal comments to the ANPRM, the Commission had additional discussions regarding cost and availability of PVO
financial instruments with SFAA and Allianz Partners, the largest U.S. travel insurance provider. SFAA reiterated many of the comments received in response to the ANPRM including the likely abandonment of the PVO program by many, if not all, of the surety participants due to the possible direct interaction of passengers with the surety companies and the lack of a court judgement. Further discussion revealed the lack of a court judgement seemed to be the largest obstacle to continued participation. The Commission also spoke with Allianz Partners in an attempt to determine the availability and cost of insurance to fill the void left by the potential abandonment of other financial instruments. It was surprising to learn that Allianz, and likely other travel insurance providers, would have little interest in providing financial coverage to PVOs in the event of nonperformance. The lack of interest appears to be due to the hesitancy of travel insurance providers to broaden their exposure in the cruise sector due to the impact of the pandemic. The Commission seeks further comment on these and any other anticipated effects on the availability of financial instruments, should the proposed regulations take effect. The NPRM
proposes that: 1 The passenger makes a request for refund from the Principal in accordance with the ticket contract.
If the ticket contract refund procedure provides less than 180 days to submit a claim, the financial instrument will be available after written notification to Principal; 2 If the passenger is unable to resolve the claim within 180 days after nonperformance, as defined in 46
CFR 540.2, occurs, the passenger may submit a claim against the financial instrument as per instructions on the Commission website. The claim must include a copy of the boarding pass, proof and amount of payment, cancellation notice, and dated proof of properly filed claim against the Principal. All documentation must clearly display the vessel and voyage
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