By Paul Motter
Last week Cruise West was a small cruise line known for pioneering Alaska cruises as far back as 1958. The line operated nine different ships in regions as diverse as Central America, Alaska, Antarctica, Baja California, the Caribbean, the rivers of Oregon and was in the middle of an extravagant world cruise.
This week Cruise West is in trouble. All but two cruises were canceled last week and the web site now only shows one simple news release dated Sept. 8 that says "Cruise West Continues Restructuring Efforts." It continues; "The first move in this restructuring is the termination of the Spirit of Oceanus Voyage of the Great Explorers."
This was not just another cruise. It was the most ambitious world cruise ever undertaken by any modern cruise line. Prices started at $230,000 per passenger for the entire voyage - about $200,000 more than the average world cruise. The itinerary spanned 335 days, about 235 days longer than the average world cruise. Spirit of Oceanus officially pre-empted the world cruise early and disembarked its passengers in St. John's Newfoundland last Friday - about six months into the 11-month cruise.
For some insight on the Cruise West developments I interviewed John Cook, president of QuoteWright.com, one of the top travel insurance providers online. Here is what he had to say:
CM: John, what can you tell me about the developments at Cruise West?
John: Basically I cannot tell you anything, the company is not actually divulging any specific information, but I can say that I have seen these situations many times and that they almost always have a bad ending.
CM: What does the letter on the Web site indicate to you? Is the recommendation that people apply for refunds immediately going to help customers get refunds?
John: The letter really just seems like redirection to me - as if the goal is to merely redirect customers away from contacting the company.
CM: So the fact that the company published the letter is not going to compel the insurance companies to give a refund?
John: Well, I can't speak for the insurance companies who underwrite these policies, but in my experience, no. They will take a wait and see position. There is no definitive proof yet that future cruises are cancelled, and until there is something like a declaration of bankruptcy they are not likely to provide refunds. Furthermore, in most cases the policy writers will merely ask the customer to contact their credit card companies first. They have the right to see if the credit card provider will offer a refund - and many credit card companies will.
CM: Is there any kind of statutory limitation on those credit card refunds?
John: According to the Fair Credit Act, a credit card company only has to reimburse you if the non-performance occurred in the last 60 days, however some credit card companies are much better than others and will go back to whenever the non-performance occurred. American Express is the best company in this regard in my personal experience.
CM: The Cruise West letter asks people with no other recourse to contact them about unfulfilled cruises already paid. Is there a fund or bond to insure there is money available to refund the customers who have already paid cash?
John: Anytime a cruise has a U.S. nexus (meaning it involves a U.S. port) the cruise line is required to keep a Maritime Commission Bond, like an escrow account, equal to the unfulfilled payments they took in. They are not allowed to touch that money until the cruise has sailed.
CM: Is that similar to the USTOA? (United States Tour Operators Association)
John: No, USTOA is a separate entity.
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Unfortunately, many Cruise West cruises do not have a U.S. nexus, and this condition may explain why the Spirit of Oceanus world cruise was cancelled in Newfoundland, Canada, having arrived from Europe, while two cruises scheduled to sail from Portland, Oregon, on Saturday went ahead.
The USTOA manages a Travelers Assistance Program that holds a $1,000,000 security for reimbursing consumers in the case of an active member's bankruptcy, insolvency or cessation of business. While USTOA has said Cruise West was active until last Saturday and that sales made before that should qualify for the fund, the question is whether $1,000,000 will even come close to enough money to cover everyone who cannot get a refund by any other means.
Cruise West was offering a 2% discount to anyone who paid the company directly by cash or check - most likely to avoid the credit card fees which can be expensive for a purchase as high as $50,000. That is the amount two ladies stranded in Newfoundland said they had paid Cruise West by check for their portion of the world cruise which was just cancelled.
Those who purchased qualifying third-party travel insurance are in the best position. In fact, before you purchase any cruise it is a good idea to see whether third party insurance is available - even if you don't plan to buy it. The reluctance of insurance providers to cover a specific travel provider is a known leading indicator that company may be in trouble.
You can discuss this article in our CruiseMates Forums: Cruise West - will it go belly up?
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