ON THE COVER: Are You Covered?

The essential guide to event insurance

MC June 2016 CS opener

Securing event insurance might not be at the top of every planner's to-do list, but it should be. Hurricanes, snowstorms, no-show speakers, fires, power outages and labor disputes are just some of the perils that can disrupt an event. Now toss in a swift-moving pandemic like the current Zika virus, or previous outbreaks such as SARS and swine flu, and that carefully planned convention or conference could easily be derailed.

Low attendee turnout, postponement or outright cancellation of an event are just some of the scenarios that can result from any of the above, and the financial fallout for stakeholders could be astronomical.

The process of choosing adequate event insurance is far from simple, however. For insights about the different types of policies and what they cover, M&C spoke to several insurance providers who specialize in the meetings and conventions industry. Think of their expert recommendations as required inoculations for your next event.


Event liability insurance
Also known as commercial general liability (CGL), this insurance protects the event holder and the venue against allegations brought by third parties on a number of issues, both on the trade-show floor and during related off-site events or outings. These include property damage or theft, bodily injury, and even libel and slander.

In our increasingly litigious society, this coverage is critical, because it is highly likely the show organizer will be cited in a lawsuit, even if it had no responsibility for the alleged loss. This is the coverage that venues require event organizers to have. The amount of coverage mandated depends on the particular venue.

What it costs. The premium is based on a number of factors, including location and type of event, total number of days of coverage (move-in and move-out days should be included), the number of people attending, as well as any additional riders, such as automobile and workers' compensation insurance.

According to Jack Buttine, president of New York City-based John Buttine Insurance, a national brokerage firm, a standard CGL policy has no deductible and provides a covered limit of $1 million per occurrence, with a $2 million annual aggregate.

The preferred partner of the Dallas-based International Association of Exhibitions and Events since 2002, Buttine developed IAEE's Exhibition/Special Event Liability program for its members. The program does allow for higher limits of insurance, because some venues, such as New York City's Jacob K. Javits Convention Center, demand more. Javits, Buttine notes, requires show organizers to have $5 million in liability coverage.


Auto liability
Strange as it might seem, another venue-required insurance is automobile liability. Just imagine a scenario where a delivery truck backs into a loading dock, or someone drives a car onto the trade-show floor and damages a column. Auto liability covers claims that arise from accidents that happen while using rented or personally owned vehicles, including damage to parked cars on the venue's site.

What it costs. "It is never very expensive," notes Buttine. "Usually $200 to $500 per show. It is usually purchased as a rider to the CGL policy."


Workers' compensation
Regardless of whether your event staff is composed of independent contractors or full-time employees, every company or organization is required by every state to have this coverage. Like auto liability, workers' compensation also is purchased as a rider to the larger CGL policy. Similarly, many venues require show organizers to have it.

While most organizers already have workers' compensation, some newly formed companies made up of independent contractors might not. Meeting planners should be sure to have such a policy in place, because the penalty for not having it is far greater than the cost. Should a worker sue for injury or medical complications, the show will be liable for his or her medical bills, as well as lost labor costs, which can pile up very fast.

What it costs. It depends on the number of employees working the show, as well as how hazardous their jobs are. For those answering phones and handling registration, it is typically $.50 for every $100 of wages the employee earns while working at the show. For those with jobs a bit more risky, involving acts such as walking along catwalks or working with rigging, the cost is $1 to $2 for every $100 of payroll.


Event cancellation insurance
The whole premise of purchasing event cancellation insurance is to protect the financial well-being of an event host. It covers financial losses associated with the interruption, postponement, relocation or outright cancellation of an event for reasons beyond the organizer's control, including adverse weather, natural disasters, damage to the venue, terrorist attacks and civil unrest. Because of its moniker, some planners assume incorrectly that this type of insurance covers only events that are canceled. Not so. It also covers reduced attendance at an event due to unexpected developments.

Case in point: In March 2010, when a cloud of ash from an erupting volcano in Iceland snarled air traffic across the globe for almost a week, it grounded tens of thousands of travelers, including many on business trips. Suddenly, untold numbers of attendees, exhibitors, speakers and entertainers couldn't make it to their events.

"It was a classic case of 'you don't know what you don't know,'•" says Mark Samperi, vice president of marketing for Portsmouth, N.H.-based BUA Insurance. "Whoever would have thought that a volcanic eruption in Iceland could become an issue for their event? Yet suddenly you had shows that people couldn't get to, and the phones began ringing."

Depending on the coverage purchased by event planners, the policy will reimburse for the loss of revenue generated by the show, such as registrations -- both prepaid and purchased on-site -- or expenses incurred as a result of cancellation, postponement or relocation. Covered expenses also can include consulting and professional fees paid to third parties as well as other service providers.

What it costs. Date, location and gross revenue are the three key factors in determining the cost of a cancellation insurance premium for an event, says Seth Fleischer, account executive at Washington, D.C.-based global insurance firm Aon Affinity/Affinity Nonprofits. "We really don't care how many people are attending, because it is the financial aspect of the event that the coverage is protecting," says Fleischer, who notes that the Washington, D.C.-based American Society of Association Executives has long endorsed his company's Showstoppers Association Event Cancellation Insurance program. As with event liability insurance, there is generally no deductible.

For inaugural shows, which have no historical data to support a claim of lost revenue, coverage will be assessed on the show's total expenses, explains Jacqueline Fellrath, who specializes in event cancellation for meetings, conventions and trade shows for New York City-based AIG. "This is what we would call basic coverage," she adds.

The most compelling reason to purchase event cancellation insurance, says Fleischer, is the high cost of being uninsured. "If an organization thinks they can sustain a year where they have canceled an event and lost all revenue, then maybe they don't need it," he posits. "But that would be a rarity. A lot of times it just comes down to board members voting yes or no on whether to purchase it."

There's another reason to buy and buy early, says Buttine: "All the insurance underwriters are waiting for someone to pay out a massive claim, and that will change the market." In other words, enormous payouts will cause future premiums to go up, providing the coverage will even still be available. Thus, Buttine advises clients with major annual shows to purchase cancellation insurance two or three years in advance.

How to file an Airtight Cancellation Claim
Suppose a worst-case scenario happens and you need to cancel or go ahead with a less profitable event. Following are best practices for filing a solid cancellation claim (which also covers reduced attendance), to ensure that the process is smooth and the payout swift.

 First, when purchasing event cancellation insurance, share any special circumstances or concerns, so the representative can write the best policy for your needs. For example, will the show have a politically charged speaker? Has a threat been made against the group in prior years? Is the venue the target of a possible protest or strike?

 When filing a claim based on financial loss, such as reduced attendance, have paperwork that supports the numbers. Just coming up with a dollar amount isn't enough. Insurance companies want to see names, addresses and amount of registration paid for every attendee. For anticipated on-site registration revenue losses, provide data from the previous two years. The more detailed the supporting paperwork, the easier it will be for the insurance carrier to assess and wrap up the claim.

 Do not cancel an event without first discussing the decision with the insurance carrier. They will advise you on the details of your policy and how the underwriter will determine your financial compensation.

 Document all communication between agencies, vendors, stakeholders and attendees that supports why a financial loss has occurred. This includes emails and social media, as well as phone conversations. Doing so not only lends credible support to the claim, it assists the insurance carrier in investigating the claim.


Communicable diseases
In recent months, as the spread of the mosquito-born Zika virus spurred the World Health Organization to declare a global public-health emergency, travelers with plans to visit destinations on the hot list -- including Brazil, Peru and much of the Caribbean -- reached out to travel insurance companies with concerns and questions about cancellation coverage.

The news for most travelers wasn't very good. Unless they bought a policy that included a "cancel for any reason" provision, they essentially had no effective coverage and no recourse to make a claim for a trip they bought and backed out of, according to Dean Sivley, president of Stevens Point, Wis.-based Berkshire Hathaway Travel Protection. Only about one in 10 travelers buys that kind of comprehensive policy, he estimates.

 

Jack Buttine
John Buttine Insurance
Jack Buttine John Buttine Insurance

There is good news for meeting planners, however. When buying event cancellation insurance, they can add on a communicable disease rider, particularly if they are headed to a destination that is on the federal Centers for Disease Control and Prevention watch list. But the time to buy is now, while the option still is being offered. "If you wait, and the threat of the disease becomes catastrophic, you won't be able to buy it," cautions Jack Buttine.

According to Aon Affinity's Seth Fleischer, communicable disease coverage so far remains an option, but underwriters are looking at pre-existing conditions in determining loss, and not offering such a rider for certain locations. "Fear or threat of a communicable disease is not enough. It has to be an actual and serious enough threat that the CDC or some authority like the World Health Organization is advising people to not travel to a certain country," he says. "In that case, an event with coverage taking place in an identified risk country could make a valid claim for reduced attendance."

What it costs. Jack Buttine began offering his meeting and event customers communicable disease coverage after the 2009 H1N1 virus outbreak, as an add-on to his ShowDown Event Cancellation Insurance program. As an example, the surcharge for a $1 million gross-revenue event, with a $3,000 premium for event cancellation insurance, could turn out to be as little as $250. "It is very modest and affordable," he says.