the third person cannot cancel the holiday; that is something only the lead passenger can do.
if they can no longer go the holiday company will recalculate the amount due for the 2 still travelling and will then return the balance, if any, to the lead passenger.
the 3rd passenger should claim any losses from their insurance company

November Package holiday booked for two adults with Thomson back in February. No insurance taken out at that time. One of the party diagnosed with an aneurysm in July and advised in August an urgent operation is necessary which has not yet taken place. Insurance is not now available. Thomson T & C on website state they will not finalize a booking without insurance. How do we stand on cost recovery?

I don't think you stand much chance of getting any money back. That's what holiday insurance is for and my understanding of Thomson's T & Cs is that for the booking to have been confirmed back in February, you or the lead passenger must have ticked the box that said that you had holiday insurance in place. Thomson's line will be that you did not fulfill your part of the contract and, therefore, are not entitled to any refund from them. Depending on when you are going, at the very least you will lose your deposit but if you did not inform them that you were going to have cancel the holiday before the date when the balance was due then you will lose more than just the deposit depending on the departure date and the date you informed them.

I know that this not what you want to hear but this is why it is so important to make sure your insurance is in place from the moment you book a holiday. Had you taken out insurance back in February and assuming the aneurism is not linked to an undisclosed pre-existing medical condition, then your insurance would have fully covered your losses minus any excess.

Hi SMa,

Thank you so much for your reply. It's not me with the problem by the way but just trying to help someone else on the PC. I agree with all you say but I was just looking for confirmation. Friends hospital operation date now given at 4 weeks before flight.