Insurance Issues for the Rich and Famous — Updated

After video emerged of Amy Winehouse stumbling around the stage, forgetting her lyrics, and looking disoriented, her "comeback" tour that began in Belgrade on June 18, 2011 was over before the first performance ended. Three days later, the performer officially cancelled all remaining European tour dates.

Neil Warnock, chief executive of The Agency Group booking agency, said Winehouse and her tour promoters may be entitled to insurance coverage for any cancellations. He said insurance settlements would depend on what previous information was provided to the insurance companies, according to a report from the Associated Press.

"If you fairly disclosed any pre-existing conditions, and what caused the cancellation is a new condition, then the artists and promoters would be covered," he said to the AP. "If it's a pre-condition, then it wouldn't be covered, or if it's an undeclared condition that should have been declared, that wouldn't be covered."

As previously mentioned, issues related to cast insurance were recently brought to light when Charlie Sheen's public behavior and criminal allegations resulted in his show "Two and a Half Men" being cancelled, although it could return at any time. What is clear, though, is that Sheen likely won't be a part of it if it does, since he was fired on March 7, 2011.

According to Lorrie McNaught, vice president with Aon/Albert G. Ruben, the retail entertainment division of Aon Corporation, aspects of cast insurance extend to things like an actor being sick or injured and unable to complete the show. There is also coverage that protects in the case of an act by an individual that is "so disgraceful that the production just can't continue."

If the show resumes along with Sheen, a higher deductible might be included, and coverage may contain particular terms and conditions. Rarely is insurance not granted at all.

Insuring a movie production can be complicated when certain celebrities like Lindsay Lohan are in the cast. Since 2007, the actress has been charged with multiple DUIs, drug offenses, and most recently, felony grand theft of an expensive necklace.

For a broker, finding coverage for difficult situations in the film business is part of the job. But in some cases, the risks are simply too high. In an interview with E! News Online in Nov. 2010, Movie Director Matthew Wilder stated that he rescinded an offer to cast the starlet partly because of insurance issues.

"Ultimately, the impossibility of insuring her — and some other issues — has made it impossible for us to go forward," said Mr. Wilder, in the interview.

Sometimes, a celebrity's troubles can serve as inspiration for new types of insurance coverages. For instance, the revelations surrounding Tiger Woods' infidelities helped one broker promote a new coverage aimed at organizations that have built their branding campaigns around a celebrity whose reputation becomes tainted.

New York-based insurance broker DeWitt Stern has worked on developing a "Reputation Risk Insurance" product for the entertainment, arts, and advertising risks. According to the company, the insurance protects brands, corporate entities, and advertisers against losses incurred from reputational crises, compensating policyholders for both the cost of crisis remediation and actual loss of revenue following a public relations crisis.

When pop singer Britney Spears suffered an injury to her left knee in the middle of her 2005 tour, she had to cancel the remaining performances. However, due to the fact that she did not disclose a previous injury to the knee, insurers denied her claim for cancelled performances.

Ms. Spears eventually brought suit against eight insurance companies, alleging the carriers illegally refused to compensate her. Three of the insurance companies named in the case were Lloyd's syndicates (Liberty Syndicate Management Inc., Beazley Furlonge Ltd. and Talbot Underwriting Ltd.). The other insurers included were Sydney-based QBE Insurance Group Ltd., Swiss Reinsurance Co., Glenn Allen, an employee of Virginia-based Markel Corp., Germany's Munich Re, and Axa SA.

Details from her pre-nup with ex-husband Kevin Federline revealed that Ms. Spears was waiting for a multi-million dollar insurance pay-out from the suit. No settlement has yet been reached.

The sudden death of Michael Jackson in 2009 triggered discussions about event cancellation claims since the artist was scheduled to perform 50 sold-out shows at London's O2 Arena before he passed away.

Although there was speculation that prescription medication may have played a part in Mr. Jackson's death, insurance professionals said event cancellation insurance coverage would likely depend on whether the use of such medication was disclosed, and whether insurers chose to accept or decline coverage for complications arising from the medication.

Some of the most challenging risks in the event cancellation insurance business include coverage for aging performers—whether they're rock-and-roll stars or operatic tenors.

As artists get older, it becomes more difficult for them to perform. Underwriters writing non-appearance policies typically ask questions surrounding the health of the artists, their track records for showing up at concerts, and how they will travel to the city and the venues where they'll be performing.

It's not always about insuring famous celebrities, though. Sometimes famous events need coverage, too, events like the Super Bowl and the Oscars.

Pulling off special events like these takes careful planning and involves a multitude of unknowns. For specialty insurers, managing general agents, and brokerages that provide and place coverage for these events, unconventional coverages must be considered for purchase, including those for weather, event cancellation, and of course liability, especially for functions with liquor service.