E&S Brokers, Insurers In Event Niche Tackle Mid-Air Dining, No-Show Celebs

o What would happen if a major award show, such as the Oscars, were to be cancelled by a labor dispute, such as the recent writers' strike in Hollywood?

Despite the seeming complexity involved in special events for insurers, those in the industry who handle these risks agree there is ample profit to be made, as long as the underwriting is sound. In addition, the turnaround for a quote is actually fairly quick in most cases, they say–many times within 24 hours.

Additionally, because it is a specialized risk, it is not heavily influenced by the pricing ebbs and flows that define the general insurance cycle.

Ultimately, every event is different, and for insurers, success in this market essentially comes down to carrier-specific decisions on comfort level.

The term "special events," after all, is "such a large arena" in the insurance world, according to Eric Taylor, vice president of underwriting for Richmond, Va.-based James River Insurance Company, an excess and surplus lines carrier that writes larger, interactive events such as auto shows, concerts and large street festivals.

Mr. Taylor noted there are some niche carriers that will only write small events, such as weddings, social gatherings and seminars. Other carriers may focus on concerts, for example, while still others might zero in on larger special events.

The nature of the event will also determine the coverages desired by clients. General liability is an obvious need for any event, but beyond that, experts agree that coverages offered or requested vary from event to event.

For example, a key question to consider is whether the event is being held outdoors.

If so, weather insurance is a good idea, according to Don Kasper, manager of the Denver office of Burns & Wilcox, a managing general agency that places coverage for smaller events (such as family reunions) as well as larger events (like concerts, rodeos), and sometimes even mega-events, such as the X Games.

Mr. Kasper said weather insurance can protect not only against an event being cancelled due to inclement weather but also for reduced attendance.

When an event features a prize offered to a contestant who can accomplish an unlikely feat, "hole-in-one" coverage should be considered, according to Bob Greenebaum, executive vice president and casualty practice group leader of wholesale brokerage Swett & Crawford. "If you're offering a cash prize, or a car, or some prize for someone in an event getting a hole in one, you can take out insurance in case someone's lucky enough to get that."

A typical exclusion for this coverage, Mr. Greenebaum noted, would be for a participant who is a professional. For example, the company would not cover the contest if Tiger Woods participated and made a hole in one.

Swett & Crawford writes events including conventions, charity functions, corporate and promotional events.

The prize coverage, said Mr. Greenebaum, is generally cheap because winning the contest is a statistical unlikelihood. "It's just one of those things that doesn't happen very often, and so I don't think it's very expensive to obtain," he said, noting that coverage for a prize such as a car could be obtained for around $300.

If an event involves serving alcohol, then liquor liability will also be a concern, and Mr. Greenebaum said most companies will write host liquor liability. This coverage protects those who are not in the business of selling alcohol, but instead only provide such liquor service occasionally as the sponsor of an event.

Corporations planning an employee outing, for instance, could either have coverage under their existing corporate program, or they can obtain coverage specifically for the outing, he said.

Sometimes, no matter how careful the planning, circumstances arise that prevent the successful execution of an event. Event cancellation coverage can protect clients should this situation arise.

Mr. Kasper described this coverage as an "all-cause" coverage, "which means as long as the cause of your event being cancelled, abandoned, postponed, curtailed or relocated is beyond your control and not excluded, you're covered for it. It's a true all-risk policy form."

Although it would seem to be an obvious coverage choice for clients, Mr. Taylor said there is actually a lack of demand, and James River Insurance does not offer event cancellation for that reason.

"We don't get a lot of requests for event cancellation, and we would not do that anyway," he said. "I find that a lot of people shop for that, but nobody wants to buy it when it comes to actually purchasing it."

Mr. Taylor added that "everybody wants a price, everybody gets a price, and then they never buy it. It's a tough close."

Speaking to why clients choose to go without event cancellation, Mr. Taylor said that "it just comes down to the economics of the event. They try to go without it." The bigger the event, he noted, the more likely that a client will try to secure the coverage.

For those who choose to purchase it, Mr. Kasper said event cancellation covers circumstances such as severe adverse weather, venue availability, earthquakes, wildfires, power blackouts, communicable diseases, major riots and civil commotion, national mourning, and possibly even terrorism and labor strikes.

With a labor strike, Mr. Greenebaum noted, underwriters will want to take a look at the relationship between labor and management before deciding whether to include that coverage.

Using the example of the recent writers' strike in Hollywood possibly affecting the ability to hold an award show, for instance, Mr. Greenebaum said that "one of the problems with underwriting events like that is that what [carriers] will exclude from coverage are 'known conditions.' Insurance is for the unknown rather than the known."

He added, "You actually could, I think, insure an event for cancellation due to something like the writers' strike, but they'd want to have a really good handle on the labor situation. If there are any [ongoing] disputes, or any unrest at all that goes on, you're not going to find coverage for that because the odds of [a strike] happening are significantly enhanced."

Timing also matters, Mr. Greenebaum said. "We always use an analogy in the business of trying to insure a building for fire when there's smoke coming out of the second floor."

"If you know there's a labor dispute going on, you're probably not going to provide strike insurance as a peril to insure against," he added.

Event cancellation also protects against the nonappearance of a keynote speaker or entertainer. Mr. Greenebaum said that, when underwriting this risk, carriers will look at the track record of the performers. "Do they typically show up when they're asked to show up?"

He referenced a situation that happened around 25 years ago where the late Luciano Pavarotti was supposed to do a charity performance. "He apparently had a record of not showing up very often, so it was a very expensive undertaking, and the [event-holders] opted not to pay for the insurance because the underwriters viewed it as a hit-or-miss kind of thing. His [odds of] nonappearance were about 50 percent."

Mr. Greenebaum said, "I was not an opera fan, so I was not aware of his propensity to not appear."