Event Cancellation Insurance and the COVID-19 Pandemic
Over the last several days a multitude of conferences, shows, concerts, ceremonies, sporting events and other gatherings have been cancelled, curtailed, or postponed because of the COVID-19 pandemic. While business insurance coverage for many exposures and losses attributable to COVID-19 can be murky, Event Cancellation Insurance policies provide relevant types of first-party coverage for event sponsors’ losses that might directly respond to circumstances like those presented by the COVID-19 pandemic.
The first type of relevant Event Cancellation Insurance coverage provides reimbursement for losses attributable to event cancellation, curtailment, postponement or relocation (“cancellation coverage”). The trigger for cancellation coverage is typically a physical or legal inability to maintain the event as scheduled. It is clear that if the event facility were destroyed by a fire, tornado, or other similar peril, the coverage would be triggered. Likewise, it is clear that if an appropriate civil authority issued an order legally prohibiting the event, the coverage would be triggered. But it is less clear what constitutes physical or legal inability if the event is cancelled solely because it could be considered reckless to convene the event from a public health perspective.
The second type of relevant Event Cancellation Insurance coverage provides reimbursement for losses attributable to abnormal and substantial reductions in the projected attendance at an event (“reduced attendance coverage”). This coverage is not contingent on any physical or legal impediment to attendance. It merely requires a reduction in attendance that is the sole and direct result of a particular proximate cause that is beyond the control of the event organizers, financiers, attendees, and exhibitors.
Some insurers of Event Cancellation Insurance policies expressly exclude coverage for infectious or communicable disease or the like. Other insurers have issued Event Cancellation Insurance policies that do not exclude and clearly would provide coverage for COVID-19 related cancellations or reductions in attendance.
Affected business policyholders with Event Cancellation Insurance should closely review their policies. While an exclusion may initially appear to apply, ultimately it may not apply in light of all the facts and where supported by the advocacy of an experienced coverage lawyer. In addition, Event Cancellation Policies impose multi-faceted obligations on the policyholder, including obligations to give prompt notice and to mitigate losses by reasonably capturing available income and avoiding added expenses. A policyholder’s failure to honor those obligations could jeopardize coverage. Moreover, optimizing the value of the coverage requires businesses to track, quantify and substantiate all direct and indirect expenses and other losses. We can help.