Risky Business: What you don’t know about event insurance can hurt you
By Mary Bufe
“In this world you’ve just got to hope for the best and prepare for the worst.”
Lucy Maud Montgomery was talking to young girls when she penned these famous words a century ago. But she might as well have been talking about a company picnic, a benefit concert or a golf tournament in 2008.
“People can and do get injured at events,” says Scott Graham, president of Excellent Meetings in Chillicothe, Ohio. “Weather and other external perils can and do affect events. People and organizations can be sued.”
And that, in a nutshell, is why there is event insurance.
Insurance really is one of those ‘must have” budget items for any event, says Graham. But it’s also one of those subjects that many independent event planners don’t know much about. To test your knowledge, see if you can separate the myths from the facts.
Myth or Fact: A general liability policy is all an event planner needs to protect against the risks associated with special events.
Myth. Event insurance is needed to cover all of the potential liabilities associated with an event. Sometimes a general liability policy covering bodily damage and property damage is sufficient for that purpose; often it is not, according to Mike Wrenn, president and CEO of The Wrenn Insurance Co. in Mission, Kansas.
The need for additional specialty insurance depends in great part on the event itself. A convention, for example, poses different risks than a sporting event or grand opening. Insurance coverage is available for a host of potential liabilities – from performers who fail to appear, to weather that doesn’t cooperate.
Products and Completed Operations coverage, for example, protects against the liabilities associated with changes made to a site for an event, among other things. In other words, if a site’s landscape design is changed to accommodate an event, sthis insurance may cover the costs associated with any subsequent flooding that might occur, Wrenn says.
The bottom line: talk with your insurance agent or broker early to make sure you understand any special risks that should be covered.
Myth or Fact: If the event sponsor has insurance coverage, it’s not necessary for the planner to have separate insurance.
Myth. “The event planner, sponsor and any other vendor that is on the premises of an event should each have their own coverage, including workman’s compensation,” says Wrenn. “If someone is hurt putting up a tent, for example, you want to be sure they have workman’s comp through their employer.”
There’s a reason everyone needs their own insurance, adds Graham. “If someone sues, they will not only sue the vendor, but everyone involved.” Wrenn recommends having coverage begin a day or two in advance of an event, and extending a day or two following it. “There are always people coming and going, both before and after an event, which could result in some insurance exposure,” he says.
Myth or Fact: If a fireworks vendor or amusement park ride company has insurance, the event sponsor does not need special coverage above and beyond the general liability policy.
Myth. If an organization is hosting an annual fair with rides and fireworks, it should first obtain evidence of insurance from the participating vendor of those services and request that they be named as Additional Insured on their policy, according to Richard Gaines, vice president of The Daniel and Henry Co. in St. Louis, an insurance brokerage.
For further protection, it is best to pursue what is referred to as “contingent” fireworks or ride liability. “This coverage would basically provide excess liability over the firework or ride vendor’s coverage,” explains Gaines. Since fireworks displays expose an organization to substantial risk for injuries to onlookers and third-party property damage, this coverage is typically of high value to event sponsors. If the vendor is involved in multiple events, says Gaines, it is also important to determine the “true limits” available to the event sponsor.
Myth or Fact: Without written “evidence of insurance,” event planners may not actually have the coverage they think they’ve purchased.
Fact. Event planners must get a binder, or evidence of insurance, prior to an event to ensure they have the coverage they need, says Wrenn. This binder is ordinarily provided by the agent or broker’s wholesaler AFTER the policy is paid for – an important consideration to keep in mind during the planning process. Without the binder on file, the broker cannot bind the coverage.
Myth or Fact: Some events – such as heavy metal concerts, rodeos and circuses – are virtually impossible to insure.
Myth. You can almost always find an insurer for an event. But that doesn’t mean that the insurance will be affordable. “The cost of special events insurance is directly related to the risks that an insurance company is being asked to assume,” says Gaines.
“There are some events that underwriters generally don’t view as controllable, and they are therefore less likely to provide coverage,” says Gaines. These types of events have historically developed severe liability losses due to unruly crowds, perceived illegal activities associated with them, and overzealous fans, he says.
If a high-risk event is planned, it’s particularly important to bring your insurance agent or broker into the picture early. Early involvement enables them to make suggestions for mitigating risks, and to obtain quotes from multiple sources.
Myth or Fact: You can get weather insurance to cover virtually any weather for virtually any event.
Fact. Weather insurance is especially important at outdoor events, including concerts; civic, governmental or fraternal activities; fairs;, carnivals; weddings; and sporting events. Working with your agent or broker, you can set the parameters for the insurance. Coverage can be purchased, for example, based on the rainfall definition of your choosing, according to Gaines.
A policy, in other words, could be written to cover more than 1/10 inch of rain within a certain time frame, based on local National Weather Service station data, explains Gaines. Premiums are based on a variety of factors, including the date and time of the event, the type of weather events covered and the insurance limits.
Myth or Fact: An event planner who fails to get weather insurance can potentially be held liable by an event’s sponsor, should it be cancelled due to a weather event.
Fact. Weather insurance can be purchased to cover a financial loss, such as reduced revenue, increased expenses or inventory loss, as well as increased product promotion expense that can result from weather-related incidents, according to Wrenn.
Without it, the event sponsor could hit the event planner with a malpractice claim, he explained. Planners are wise to cover themselves by asking the event sponsor to sign off on this coverage if it’s not being provided.
Myth or Fact: “Hole in one” insurance for golf tournaments is difficult to obtain.
Myth. A variety of insurers offer this coverage, says Carla Stille, an underwriter at The Daniel and Henry Company.
With this insurance, the insurer assumes the risk associated with a valuable prize (i.e., a car, house or cash) for a fee. If a participant sinks a hole in one on a designated hole, the insurer pays for the prize. Like other coverages, the policy fees depend on the value of the prize and number of participants.
Myth or Fact: Cancellation Event Insurance protects an event sponsor if an event must be cancelled due to poor ticket sales.
Myth. Cancellation insurance can be purchased to protect against a net loss should a performance or event be cancelled, postponed or rescheduled due to a covered reason, says Gaines. Poor ticket sales, however, is not one of them.
Non-Appearance Insurance can be purchased as well. It generally requires a medical exam of the individual who is planned to make the appearance. Is it worth it? That’s something planners have to decide for themselves, says Graham. “If a no-show performer is going to take revenue from the event, it may be worth the cost of the protection,” he says.
Insurance, however, is not the only way for event planners to protect themselves. It is important to work with reputable talent agents, he says. “If talent is unable to make an event, due to weather or other extenuating circumstances, often a reputable agent can replace him or her with the same or better quality talent.”
Myth or Fact: Most organizations cannot afford event insurance.
Myth. The fact is, most organizations cannot afford NOT to have event insurance. To help minimize the costs, it’s smart to work with an agent or broker who can advise on “risk mitigation techniques,” according to Stille.
The cost of event insurance, Wrenn adds, can be minimized dramatically if planners give their insurance brokers enough time to check with the marketplace. With enough lead time, a broker can obtain quotes from multiple sources. Wrenn suggests event planners begin the insurance process at least a month prior to an event. That gives the insurance broker time to adequately assess the risk exposure and make the best recommendations.
In addition to beginning the process early, Graham has one other piece of advice for event planners: “It is important to understand what the policy will and will not cover and for whom. Always ask questions. Do not assume you know the answers.” MM&E
(Mary Bufe is a contributor from St. Louis, Mo.)
(Richard Gaines, Vice President of The Daniel and Henry insurance brokerage, will be presenting at the Missouri Meetings & Events 2008 St. Louis Regional Expo – PLANit GREEN – March 24-25. Register for this event online at www.MissouriMeetingsAndEvents.com.)