Lost, Damaged, or Delayed Luggage

In 2012 passengers filed a record 1.78 million reports with carriers when their luggage was lost, damaged, or delayed. Now that everyone travels with smartphones and laptops, losing luggage could mean the loss of thousands of dollars. In the past, many air carriers were enforcing unreasonably low limitations of liability for lost, damaged, or delayed luggage—limits in the range of $500 to $1,000. Many carriers also included clauses disclaiming all liability for common items including cash, computers, telephones, cameras, and medicine. These limitations of liability were contained in the airline’s Contract of Carriage, the agreement governing the relationship between the air carrier and the passenger. This overwhelming document, full of legalese and every imaginable limitation of liability, is a textbook contract of adhesion.

In 2010 the DOT recognized that these limitations and exclusions were seriously harming consumers. The DOT issued a rule requiring carriers to take responsibility for, at minimum, $3,300 (adjusted annually for inflation) in case of lost, damaged, or delayed luggage on domestic routes (14 CFR 254.4). As a second measure of consumer protection, the DOT invalidated the airlines’ exclusion clauses and required carriers on both domestic and international flights to compensate passengers for all items in their baggage. So, your electronics and other valuable items are now covered, but I still don’t advise packing your Ming vase.

To enforce these new rules, the DOT has the power to impose fines of $27,500 per incident on carriers that include lesser limits in their Contracts of Carriage or that refuse to pay legitimate claims. Unfortunately, many carriers still have not gotten the message and continue to inform bewildered passengers that they would not pay for an iPhone or laptop in the lost luggage. When this occurs to one of my clients, I have the consumer file a quick online complaint with the DOT (dot.gov/airconsumer). For consumers going to battle with mega-carriers like United, which accumulated one-quarter of all carrier complaints in 2012, sometimes a DOT complaint is needed to obtain an “attitude adjustment.” In addition to imposing a fine, the DOT can also place the carrier on probation to ensure that it takes significant corrective steps to prevent future violations.

Unfortunately, international routes are beyond the reach of the DOT rules because they are governed by the Montreal Convention, an international treaty. The Montreal Convention provides the surprisingly low amount of 1,000 “Special Drawing Rights” (SDRs) per passenger for lost, damaged, or delayed luggage on international flights. The value of SDRs is based on an average of a market-basket of foreign currencies; currently, 1,000 SDRs equals $1,518. The same 1,000 SDRs applies for passengers flying within the European Union (EU) because the EU integrated the Montreal Convention’s limits into its laws.

Delays and Cancellations

Under U.S. law, air carriers are permitted to delay or cancel flights with practically no consequences. Contrary to popular belief, there is no U.S. law requiring them to provide meal vouchers or hotels. However, some airlines will provide these accommodations because they agreed to do so in their Contracts of Carriage. So, when you are buying your ticket, don’t just compare price. Go a step further and compare the protections under the carriers’ Contracts of Carriage. Sometimes paying a few extra dollars for a ticket will get you a room and a meal in case of delay.

Under EU law, there are repercussions for delays and cancellations. Passengers are entitled to reimbursement for reasonable meals and refreshments and two free telephone calls, e-mails, or faxes where there is a sufficient delay (i.e., delays of two hours in “short haul” trips up to 1,500 km, three hours in “medium haul” trips up to 3,500 km, and four hours in “long haul” trips greater than 3,500 km; Regulation No. 261/2004, Article 6). Where the delay is five hours or more, passengers are entitled to reimbursement of the full cost of the flight ticket together with a return flight to the first point of departure at the earliest opportunity. When a flight is canceled, the passenger is entitled to cash payment based on the length of the flight (short haul, €250; medium haul, €400; long haul, €600; Regulation No. 261/2004, Article 5).

Tarmac Delays

For the lucky few who don’t know, a “tarmac delay” is the “holding of an aircraft on the ground either before taking off or after landing with no opportunity for the passengers to deplane” (14 CFR 244.1). After a few particularly horrific tarmac delays in 2008 and 2009, the DOT took action. Initially, it punished the responsible air carriers by considering the delay to constitute a violation of the broad unfair and deceptive practices law. The DOT then took it a step further and enacted regulations strictly limiting tarmac delays and penalizing carriers that violate the rules. Now, when a tarmac delay occurs, passengers are entitled to the following (14 CFR 259.4):

• Notification every 30 minutes about the status of the delay;
• An opportunity to deplane if the carrier voluntarily chooses to open the aircraft door;
• Snacks (like granola bars) and water after two hours; and
• Operable lavatories.

For domestic flights, passengers must be allowed to deplane after three hours. For international flights, they must be allowed to deplane after four hours. Failure to comply can result in penalties of hundreds of thousands of dollars. Of course, both of these rules include broad exceptions for air traffic control and safety/security. Under EU law there is no specific regulation targeting tarmac delays, and they are treated like regular delays.

Overbooking and Denied Boarding

Ironically, the fact that it is perfectly legal for airlines to sell more tickets than seats on a flight (overbooking) is the result in large part to the actions of consumer advocate Ralph Nader. Nader was overbooked on his way to give a speech in 1972 and took the case to the U.S. Supreme Court. He lost in Nader v. Allegheny Airlines, 426 U.S. 290 (1976), and helped the carriers establish a precedent allowing them to overbook so long as they give passengers sufficient notice. Thus the signs at counters and on the back of paper tickets (for those of us who still remember them).

Bumping is a bad word when you are a traveler. If you are involuntarily denied boarding, you are entitled to immediate payment of the following compensation (14 CFR 250.5):

Domestic Flights:

• 0 to 1 hour arrival delay: No compensation
• 1 to 2 hour arrival delay: 200% of your one-way fare (up to a maximum of $650)
• Over 2 hours arrival delay: 400% of your one-way fare (up to a maximum of $1,300)

International Flights:

• 0 to 1 hour arrival delay: No compensation
• 1 to 4 hour arrival delay: 200% of your one-way fare (up to a maximum of $650)
• Over 4 hours arrival delay: 400% of your one-way fare (up to a maximum of $1,300)

Passengers who are involuntarily denied boarding are entitled to payment in cash/check, but many carriers first offer payment in tickets/vouchers. Sometimes they will offer more vouchers than the minimum cash payment. If you fly that carrier frequently, it might work out better for you to take vouchers. But make sure to read the fine print first before accepting them. The DOT recognized this and now requires carriers to notify passengers of the terms and conditions of travel vouchers when they offer them (14 CFR 250.9(c)).

When a flight is oversold, carriers often request volunteers. Volunteers may be offered any amount of compensation by the carrier. If I absolutely need to get onto a flight that has been oversold, I will yell out (without alarming the security officers) that I will throw in an extra few hundred dollars to obtain a volunteer. As attorneys we are taught how to make deals work. Another few hundred when you have to get to a meeting and you are billing at twice this amount or more has worked for me and for my friends who have called me from the airport asking what to do.

The United States and EU differ regarding compensation for involuntary denial of boarding. Under EU law, a carrier must pay a volunteer the full cost of the ticket and provide a return flight to the first point of departure at the earliest opportunity. If the passenger is denied boarding involuntarily, the carrier must treat this passenger as though his or her flight was canceled, which entitles the passenger to reimbursement of the ticket price within seven days, rerouting, meals/refreshments, a hotel, and the cash payment discussed above (Regulation No. 261/2004, Article 4).

Enforcing Your Rights

The bad news: There is no private right of action for violation of the DOT’s consumer protection regulations. So passengers cannot sue the airline themselves and instead must rely on the DOT to enforce the rules. However, the DOT is no paper tiger. In 2012 the DOT brought 62 enforcement actions and imposed more than $4 million in penalties for violations. Figure 2 shows the types of actions brought by the DOT and the frequency of enforcement. Unfortunately, injured passengers don’t have a right to compensation under the law, and the U.S. government keeps all the penalty money.

Clever attorneys have tried to work around the lack of private right of action by bringing suit under state laws (usually consumer protection statutes and/or tort theories). These attorneys find themselves stymied when they discover the complete federal preemption enjoyed by the airlines. In Morales v. Trans World Airlines, 504 U.S. 374 (1992), the Supreme Court held that federal preemption completely prohibits states from enforcing any law “relating to rates, routes, or services” offered by an air carrier. So I caution attorneys to familiarize themselves with Morales before bringing an action against an airline.

Practically all state consumer protection statutes and tort claims are rendered useless against air carriers. This leaves consumers and their attorneys with just one remaining cause of action: breach of contract—specifically, breach of the completely one-sided, adhesive Contract of Carriage. On average, legitimately harmed passengers are able to get their money back in small claims court for breach of contract. Unfortunately, small claims court does not offer the remedies consumers and attorneys generally hope for, such as reimbursement of attorney fees, emotional distress damages, and punitive damages.

What to Do When Problems Arise

When problems arise at the airport, your best initial response is to go online to the carrier’s Contract of Carriage to see what your rights are under the contract. Are you entitled to overnight hotel and meals? Will the carrier send you to another carrier that can get you there sooner? Thanks to a recent DOT rule (14 CFR 259.6), all air carriers must post their Contracts of Carriage on their websites and make them easy to locate from the carrier’s home page. Next, go to my website, travellaw.com, which has travelers’ rights information, including easy-to-understand articles and television interviews on emergency ways of handling these issues.

Take Off on a New Adventure

Finally, don’t feel you must limit your involvement in this area of the law to those unfortunate occasions when you personally find yourself seeking redress. Travel and tourism is the number-one service industry in many countries, and the number of counsel emphasizing this practice is amazingly few. It is certainly a fun area to practice in. Maybe now is the time to schedule your departure for the wonderful world of travel law.