Social Distancing During Wedding Season: Mitigating Loss and Securing Insurance Coverage
In a typical year, March flowers hint at wedding showers soon to be celebrated. But 2020 is not a typical year. As travel and crowd size restrictions continue to tighten, the wedding industry—which relies on large gatherings of people, many of whom travel for the occasion—has been and will continue to be significantly impacted. And wedded bliss is big business; as reported by NPR, “Americans spent $54 billion on more than 2 million weddings” in 2019.
As my colleagues have noted, insurance may be an invaluable resource to businesses impacted by the coronavirus and related restrictions. How does this apply to the wedding industry, including venues, event planners, photographers, videographers, caterers, musicians, florists, and potentially airlines, hotels, and online travel vendors?
For all such businesses, vendors’ own losses (also known as “first-party claims”) may be covered by the following types of insurance:
- Property Insurance, which can apply when a property cannot be used for its intended purpose, even absent structural damage or destruction. Thus, for example, the contamination of a wedding venue, rehearsal dinner site, church, photography studio, or other location due to the presence of coronavirus may be covered.
- Business Interruption Insurance, which is designed to reimburse policyholders for profits lost due to a covered risk. Such insurance may apply both for amounts lost while a company is out of operation and while the company has resumed operation and is working back up to full capacity.
- Contingent Business Interruption Insurance, which covers loss sustained by one company as a result of impacts on a third party, such as a supplier. For example, loss may be sustained by a domestic wedding vendor because a dress ordered from China will be delivered late due to restrictions in place there. And given how many vendors can work together on a single wedding, this coverage type could conceivably apply to more than one loss in connection with a single event.
- Business Income Insurance, which may apply to loss of income that results from governmental orders that limit the business’s ability to operate. Although such coverage often is time-limited, how those limits apply will—as always—be subject to specific policy language and facts.
- Event Cancellation Insurance, which generally applies when loss results from a cause “beyond the insured’s control.” Although this coverage typically is discussed in the context of concerts and the like, if contained in vendors’ policies, it could apply to wedding-related losses as well.
Regardless of the insurance type, vendors would be wise to keep records of how virus-related restrictions impact their business. Those facts will be key to any claim.
Vendors also may seek coverage for claims filed against them if, for example, they provided services for a wedding that occurred before restrictions were put in place and attendees were exposed to the virus. Such third-party claims potentially could be covered by General Liability Insurance, Workers’ Compensation Insurance, and Employers’ Liability Insurance.
When submitting a claim for first- or third-party losses, policyholders should expect insurers to reserve rights or deny claims based on limitations in the policies that may, on their face, appear to apply. However, policyholders should never accept at face value an insurer’s reservation or denial. For one thing, limitations on coverage are construed narrowly, and whether they apply depends on specific policy language and facts. For another, if reasonable people could read a coverage limitation differently, the policy is ambiguous, and will be construed in favor of coverage.
Finally, regardless of the type of insurance, a key factor for the wedding industry will be mitigation, or minimizing loss. Common law and many insurance policies require policyholders to try to minimize the negative impact of an event on their business. For wedding vendors, this might mean accommodating couples by postponing services. That, in turn, means that vendors ultimately will receive payment, but only after a gap in income. In an industry that tends to be locally based and relies on word of mouth, this approach is a smart business practice. And, in some instances, insurers may reimburse policyholders for both the amount they spend to minimize loss (e.g., costs associated with finding a new date and dealing with associated logistics), any income they lose during the “gap” period that they are unable to defer, and the opportunity costs resulting from weddings being rescheduled when others might otherwise have taken place. In short, working with your clients to save their big day might be the right choice in more ways than one.