From Adele to the NFL, Large-Scale Event Disruptions Show the Need for Policyholders to Have a Strategy to Recover in the Event of a Loss
The ongoing Covid-19 pandemic and supply chain issues have caused several major event organizers to cancel or postpone concerts, sporting events, and awards shows, among many other large-scale events. For example, this week, Elton John postponed tour concerts after testing positive for Covid-19; last week, Adele put on hold her much-anticipated Las Vegas residency over “delivery delays” and Covid-19 diagnoses among her team; last month, the NHL, NBA, and the NFL rescheduled major games, with the NHL citing concerns about “the fluid nature of federal travel restrictions,” and the NFL citing “medical advice” after “seeing a new, highly transmissible form of the virus;” and the Grammys postponed its January 31 awards show in Los Angeles—to now take place on April 3 in Las Vegas. The cancellations and postponements of these types of events often have major financial effects on its organizers and producers. Given the risk of substantial losses following the cancellation of big-ticket events, businesses should be aware that they can tap into event cancellation insurance to mitigate and protect against these risks.
“Specialty” Event Cancellation Coverage
Contrary to general liability insurance coverage—which protects against third-party bodily injury or property damage claims—event cancellation insurance is an elective, specialty-type insurance coverage designed to protect a policyholder’s loss of revenue and expenses following the cancellation, postponement, curtailment, relocation, or abandonment of an event for reasons outside the policyholder’s control.
As a threshold matter, for there to be coverage under an event cancellation policy, there must first be a triggering cause covered under the policy. Some event cancellation policies are written as “all cause”/“all-risk” policies. These policies provide coverage for any cause that is not specifically excluded by the policy. Other event cancellation policies, however, provide more limited coverage and are written to insure event cancellations or postponements following a narrow set of causes, which are typically listed within the policy.
Potential Coverage Issues
Although event cancellation policies typically provide broad coverage, businesses must be wary of certain obstacles insurers may raise in trying to avoid paying claims. Insurers might seek to disclaim or limit coverage for various purported reasons, including alleged non-disclosure at the policy-application stage, failure to satisfy certain conditions after the loss, application of policy exclusions, timely notice, and questions about whether an event was cancelled for a covered cause of loss. By way of example, insurance companies have denied coverage for event cancellations during the Covid-19 pandemic arguing, in part, that the “proximate cause” of the policyholder’s loss was the Covid-19 pandemic (a “communicable disease” excluded by the policies) and not the government orders prohibiting large gatherings (a covered cause of loss under the policies).
Steps to Secure Coverage
If an event is cancelled or postponed that might be covered by event cancellation coverage, policyholders must know that they might have a claim for coverage to protect against the resultant losses and extra costs. To secure coverage, policyholders are well-advised to:
review the event cancellation policy at issue for potential coverages (as well as all other insurance policies that might provide coverage);
provide immediate notice of the potential event cancellation claim to all applicable insurers; and
keep detailed, up-to-date accounting records of all losses and costs at issue, including lost revenue and profits, as well as extra expenses.