In addition to businesses that have had to close their doors indefinitely, ticketholders and travelers have sadly watched an ongoing slew of concerts, festivals, weddings, conventions, and sporting events be postponed indefinitely or cancelled altogether.
In Texas alone, major events such as South by Southwest and the Houston Livestock Show and Rodeo (to name just two) have been cancelled because of COVID-19. Special event cancellation coverage could potentially help those who had to cancel events leading to lost revenue during the ongoing pandemic.
What is Special Event Insurance?
Special event insurance coverage essentially works to protect any event-related revenue or expenses should the event need to be canceled. This coverage typically includes fees associated with the cancellation, abandonment, disruption, or rescheduling of the event.
Special event coverage differs from many other forms of insurance in that business losses or some form of physical damage are not a prerequisite for recovery.
Policyholders who obtained special event coverage prior to January 2020 may have purchased optional coverage for cancellations due to infectious or communicable diseases; however, following the SARS outbreak, many insurance companies have specifically excluded them.
Event policies may also contain a pandemic exclusion or an exclusion for government-issued quarantines; however, depending on the wording of these exclusions, coverage might still be available for events canceled because of the coronavirus.
Two common examples of Special Event coverage are Event Cancellation coverage and Leader Property coverage.
Event Cancellation Coverage
Who obtains event cancellation coverage?
As an initial matter, it is important to note that event cancellation coverage is not the same as travel insurance. Travel insurance, commonly offered through an airline, protects an attendee of an event in case that person needs to cancel their trip. Event cancellation insurance, on the other hand, is procured by the host or participant in the event.
The most common example of an event cancellation policyholder is the host of the event (e.g., a trade organization hosting their annual convention, or a sports team hosting a game). But it can also include a sponsor of the event, vendors who sell merchandise at the event, caterers, or anyone else whose income relies upon the happening of the event.
What events trigger coverage?
Event cancellation coverage provides reimbursement for revenue lost or expenses incurred, such as deposits. As with all insurance policies, in determining whether event cancellation coverage applies, it is important to note what types of events trigger coverage.
Specified Causes of Loss Coverage
Some event cancellation provisions specifically list covered causes of loss. In order for coverage to be triggered, one of those events must occur. This is known as a “specified cause of loss” type of policy.
Examples of covered causes of loss may include severe weather, earthquakes, terrorism, labor strikes, non-appearance of key people, and unavailability of the venue. Generally, this list of covered causes of loss encompasses many different reasons for cancellation that are beyond the policyholder’s control.
A different type of event cancellation coverage is known as “all-risks” or “all-cause” coverage. To contrast this with “specified cause of loss” coverage, which requires the policyholder to show a certain event occurred in order to prove coverage, an all-cause event cancellation policy will cover any event cancellation unless it is specifically excluded. Whether a policy covers a cancellation arising out of COVID-19, then, depends on the language of the policy.
Unfortunately, event cancellation policies – like many other business interruption policies – may contain exclusions for viruses or other pandemic events. And so even if a policyholder has “all-cause” event cancellation coverage, the insurance company might deny coverage if an exclusion applies.
What types of losses are covered?
With event cancellation coverage, the policyholder will seek to protect its investment in the event. What the policyholder decides to protect varies based on the type of event, or what the policyholder is willing to spend on premiums.
But typically, these policies can provide protection for loss of expenses, revenue, or profits. Some coverages offer protection for expenses incurred to prevent cancellation of the event (although, with the COVID-19 threat still ongoing, this has not come to the forefront yet.)
An event cancellation policy may also provide coverage for enforced reduced attendance, or a substantial reduction in the projected attendance for the insured event, of either attendees or exhibitors, based upon past attendance.
In short, policyholders have wide leeway in deciding what they want covered, but – as with any insurance product – the more that is covered, the more the policy is likely to cost.
What Types Of Events Does Event Cancellation Insurance Cover?
Some of the events that event cancellation insurance can cover include, for example:
- Award Ceremonies
- Charity Functions
- Community Events
- Company Parties
- Concerts & Music Events
- Conferences, Conventions & Meetings
- Corporate Hospitality
- Employee Incentive Trips
- Fairs & Festivals
- Fashion Shows
- Memorial Services
- Product Launches
- Special Events
- Sports Events
- Trade Shows & Exhibitions
- Theatre Productions
Leader Property Endorsement
A much less common type of coverage is a special endorsement called “Leader Property” coverage. This endorsement helps protect your business if an off-premises facility within a certain distance of your property – known as the “Leader Property” – incurs property damage that affects your business.
One example that could trigger this coverage includes restaurants that rely heavily on foot traffic from the customers of other venues like casinos, stadiums, shopping malls, or amusement parks.
The following common extensions are often included in leader property endorsements:
Depending on the severity of the outbreak, organizations might incur voluntary cleanup costs. And governments and regulators may force other businesses to temporarily close to clean facilities.
This extension addresses the enforcement of either a law or ordinance or the action of a government authority due to the presence of contaminants.
Communicable disease cleanup
This extension can provide coverage for the cleanup, removal, and disposal of covered property due to the presence of a communicable disease on-premises.
The coverage is triggered limited or prohibited access to the insured’s premises by the order of an authorized governmental agency pertaining to the communicable disease, such as a stay-at-home or shelter-in-place order.
This coverage is often subject to an annual aggregate sublimit, which may combine it with other categories of loss.
Texas COVID-19 Insurance Claims Attorneys
The myriad different events that have had to unfortunately be canceled or indefinitely postponed due to COVID-19 has been staggering. Insurance companies are supposed to honor valid claims, but this doesn’t always happen, and many claims result in unreasonable denials, delays, or lofty estimates intended to derail business interruption claims.
At Raizner Law, our experienced lawyers have successfully handled large, complex insurance disputes against nearly every major insurance company. Contact us today to see how we can assist you with your coronavirus business insurance claims.