For companies forced to postpone or cancel live events during the coronavirus (COVID-19) pandemic, event cancellation insurance may serve as a way to protect assets and mitigate losses.
Businesses that provide, sponsor, or organize live events, including sports events, entertainment performances, conventions, trade shows, conferences, concerts, festivals, or any other kind of public gatherings, have been forced to cancel or reschedule such events as a result of the COVID-19 pandemic. While a business’s most immediate and important concerns naturally involve the health and safety of its staff and attendees, there are certain steps that should be taken immediately to protect its insurance assets and mitigate its financial losses.
Event cancellation coverage is a specialty insurance policy that protects revenue and expenses incurred in connection with the cancellation or rescheduling of an event. Many policies also provide coverage for extra expenses, which include necessary expenses incurred to continue the normal operations of an event despite some peril. Event cancellation insurance is generally triggered if an event is cancelled, postponed, or otherwise adversely affected by a “covered event.”
What constitutes a covered event is defined in the individual policy and usually extends to circumstances beyond the control of the event organizer, including as a result of a civil or governmental order. Typical policy language provides that the insurer will indemnify the policyholder for its loss as a direct result of the cancellation, abandonment, curtailment, postponement, or relocation of the insured event. The specific terms can vary, but many event cancellation policies offer broad “all-risk” or “all-cause” coverage, which is triggered by any unexpected cause that is not expressly excluded.
Some policies provide that only specific causes or risks will trigger coverage. Such policies routinely contain a list of covered causes and may include communicable diseases or even more specifically pandemics. Even under policies that include coverage for communicable diseases, some coverages won’t be triggered if an organizer cancels merely due to the threat or fear of a communicable disease. In order to be covered, the cancellation has to arise from an actual outbreak of a communicable disease.
In addition, some event cancellation policies might contain infectious or communicable disease exclusions, which might preclude coverage for such losses. Moreover, some policies may expressly bar coverage for certain types of diseases, including, starting in January 2020, COVID-19. Even if an event cancellation policy contains a communicable disease exclusion, the exclusion may not apply based on the policy language and specific circumstances of the cancellation.
If a company purchased a form of event cancellation coverage and had to cancel or reschedule an event, or is considering doing so, due to the COVID-19 pandemic, and has a potential claim for coverage, then it is important to protect company assets by taking immediate steps. The following playbook may be helpful:
Keep in mind that the careful review of insurance policies, thorough documentation of losses, and timely notice and tender are just the first steps in preserving a company’s rights to coverage. Our insurance recovery lawyers are available to assist with asset preservation and recovery efforts, including reviewing the relevant insurance policies and providing guidance on the potential responsiveness of coverage with respect to event cancellation losses.
For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Scott T. Schutte
Harvey Bartle IV
Lauren A. McCulloch Semlinger