Let The Good Times Roll, Insurers Say

By far, the most popular category for unique risks described to NU fell in the area of entertainment–with more than a dozen involving people engaged in strange hobbies or assembled as spectators at organized events.

The biggest celebratory event risk in the group, written by the E&S unit of Boston's largest insurer, was the Boston Pops July 4 concert of 2005, complete with fireworks.

A 30-year-old tradition, the event attracts 500,000 people, but its producers had a clean history with respect to insurance claims, according to Scott Bayer, senior vice president for Liberty International Underwriters, a New York unit of Liberty Mutual.

The risk was unusual for LIU because of its grand size, Mr. Bayer reported, noting that potential claims relate to injuries from food sold by vendors, standard slip-and-fall incidents that the insured could be responsible for, assaults, or claims from fireworks injury or damage.

There's also a “parameter-risk type exposure,” he said, explaining that when half-a-million people gather in one place, “sometimes you just don't know what's going to happen.”

Losses would have to be catastrophic for the insurance to respond, he said, noting that LIU's policy covered contingent exposures for the event producer–fireworks exposure in excess of fireworks contractors' primary coverage, liability exposures above those covered by primary policies of individual vendors, and gaps in coverage that might cause claims to fall to the insured.

Attention to loss control convinced LIU to accept the risk, he said. “They worked very well with the City of Boston,” keeping emergency service personnel on site as well as a large contingent of Boston police officers, with the fire department on call to respond to issues arising from fireworks.

(In 2005, Liberty Mutual sponsored the celebration, but Mr. Bayer said it was a relationship with a wholesale broker that brought the business to LIU.)

While Mr. Bayer reported no known claims from the Boston Pops concert, some events are fraught with perils that even insurance underwriters can't anticipate–like an assassin's bullet that caused the motion picture Oscars to be handed out a day late in 1981.

Claims for lost revenues under a cancellation insurance policy for the Motion Picture Academy of Arts and Sciences probably weren't paid that year–when the television broadcast of the awards was preempted by an assassination attempt on President Ronald Reagan far from the event site–but they have been covered since, according to Aggi Pharo, vice president of the program division of Risk Specialist Companies, a unit of AIG.

Eliminating a gray area of coverage, AIG manuscripted wording specifically stating that “any attempt at assassination of the president or a national figure” would trigger event cancellation coverage, she said. That's how AIG got the business, she said. And “that's a risk that is covered today.”

David Price, executive vice president and chief underwriting officer of Burns & Wilcox, took on a different type of challenge when he worked to develop an entire program of coverage for owners of powered parachutes.

In an e-mail, Mr. Price described a powered parachute as “a one- or two-seat ultra-light flying machine consisting of a go-cart-like structure with a propeller on the back,” with a “sausage-like parachute” rather than a rigid structure for the wing.

About four years ago, he said, an agent with several clients that manufactured the units reported these manufacturers were concerned because parachute buyers could not get insurance. “The aviation insurers would not consider them because at the time they were not regulated by the Federal Aviation Administration…Other insurers did consider them 'aircraft' and would not… write aviation,” he explained.

“I personally like to fly and was intrigued by this challenge” to develop the first insurance program of all-risk coverage on the machine and third-party liability, he noted. “I could understand the concept of a simple aircraft that could be flown by most people and which above all is very safe.”

Tapping into longstanding relationships with some Lloyd's underwriters, Mr. Price convinced them to provide the needed coverage. Liability limits average $300,000 to $500,000 for units valued at $16,000 to $18,000, he said–adding that since inception, there have been very few claims and no serious accidents, while “a coverage need has been satisfied at an underwriting profit.”

Those flights sound sedate when stacked up against an event covered by Scottsdale Insurance–the U.S. version of Pamplona's Running of The Bulls. “We did the spectator coverage–not the foolish people that were running with the bulls,” noted underwriting vice president David McDermid, explaining that spectator's watching the Arizona event in 2002 were positioned above the streets and far out of harm's way.

A less bullish coverage idea surfaced on a list sent to NU by Markel–spectator liability for a “Cow Pie Bingo” event in Pennsylvania. (For curious readers, Cow Pie Bingo is a charity event in which a cow roams in designated areas where squares have been marked off. Bingo players place bets on the squares, and the player choosing the square in which the cow makes its first deposit is the winner. Variations involve multiple cows.)

One insurer found another risk in the entertainment-with-animals category beyond distasteful, according to Monte Stringer, executive vice president for Dallas-based wholesaler U.S. Risk–property coverage for a sports bar featuring cock fighting.

“It's actually legal in Louisiana and the agent thought we were crazy for questioning him on this,” Mr. Stringer wrote in an e-mail, reporting the experience of one of U.S. Risk's Louisiana brokers.

With its masonry construction, this risk would have otherwise been “no big deal,” but the “dirt floor, drain in the center of the arena for blood and cages for the birds were huge questions” for an inspection company working for the insurer. The insurer stayed on the risk until it found out the truth about the drain and cage contents, declining to continue coverage for ethical and moral reasons.