Event Planning: Anticipate Everything!

It was already difficult for organizers to get liability coverage for public events before September last year – now more so than ever. Insurers are retrenching and the liability coverage required for outdoor events has been difficult to source. Motor sports, air shows, parades and festival types of events have particularly high risks for liability with the crowds they attract.

This has created considerable reluctance on the part of insurers to provide liability coverage for such events. Event liability and many more esoteric types of insurance are suffering as insurers turn their attention to fixing their standard property/casualty business and de-emphasizing “special risks” business in wake of the New York disasters. The potential for political unrest also increases liability risks. We have seen property damaging riots associated with summit meetings, national political conventions and other events. There are also personal injury risks at these events. In the case of events such as air shows or motor sports, the risk of injury to a large number of people and the potential litigation encourages insurers to be reluctant in underwriting or to reduce their risks by increasing premiums.

TWO COVERAGES

There is another side to event coverage. What risks occur if the event does not go on or must be cancelled? There certainly is no crowd liability issue if no one is attending. Events need both liability and cancellation coverages, but often organizers look only at the liability coverage feeling that is where there is greater exposure. As a result, they self-insure or non-insure the cancellation risk or worse yet do not fully understand it.

When disastrous floods struck Prague and central European cities this summer, what happened to the events scheduled? We know that virtually all were cancelled, but who was responsible for the financial losses that occurred?

Closer to home, the Quebec ice storms of 1998 caused power outages and transportation impediments that led to events being cancelled. And, it is not just weather that can prevent events from being staged on schedule. While the insurers beat a path away from the high-hazard types of liability coverage, there is an appetite among insurers to accept the cancellation types of coverage here and elsewhere.

CANCELLATION RISK

Paul Allingham, the executive vice president for “regions, resources, surf & trade” at DMG Exhibitions Group, which manages about 300 shows worldwide, notes that most of their shows are owned and operated – so if there is a cancellation, profit is at risk as well as costs leading up to the show.

“The things we were most concerned about,” says Allingham, “are the things that are beyond our control, like extreme weather or earthquakes that either shut a region down or limit travel to it. We are also concerned about facility issues that might prevent an event from being staged like strikes or other issues relating to venue infrastructure.”

Susan MacEachern, vice president of Chubb custom market for Canada, notes that event cancellation insurance can be rather sophisticated. “Most professional event managers look for coverage against serious problems that can lead to postponement, cancellation or relocation of conventions, trade shows, exhibitions, entertainment or sporting events.” The scope and depth of the coverage required often means that cover is not available in all markets, says MacEachern. Notably, the U.S. market has constricted post 9-11, but less so in Canada. Canadian-based coverage from a multinational allows access to local claims people around the world, wherever the event may be scheduled.

The cancellation policy typically covers against risks resulting from problems with event venues, extreme weather, strikes by infrastructure employees, non-appearance of a large number of participants and other perils that force cancellation of a major event. The insured is covered for non-recoupable or additional expenses incurred due to cancellation.

LIABILITY COVERAGE

Cancellation coverage does not eliminate the need for event liability coverage. It is an entirely different type of policy. The two can be bought jointly or separately and with varying conditions and riders.

Buyers of the policies include event promoters, organizers and any organization that may be employing them to manage an event. Some show owners, like Allingham’s clients in New Orleans, insist that event cancellation coverage is simply a part of prudent planning.

Event planners have learned to anticipate that there are things they cannot anticipate. This has lead to more and more reliance on insurers for protection.

Event planners hear it all the time: “Think of everything!” Hundreds, perhaps thousands of people are counting on them, but like lightning from the blue, things happen that can threaten events and create significant financial exposure for organizers and planners.