College football is big economic business, especially in the Sunshine State, where Saturday afternoons are dominated by college rivalries at places such as "The Swamp." But football isn't always number one on Mother Nature's agenda, as was the case with the recent events from Hurricane Matthew.
On Friday, October 7th, the storm was charging towards the Atlantic coast of Florida with 145-mile-per-hour winds and a predicted storm surge of eight to ten feet. This category 4 storm was to be the biggest since Wilma in 2005.
Florida vs. Matthew
Right in the crosshairs was Gainesville, lying less than 50 miles from the east coast and almost certain to be hit with some hurricane force gusts. This was quite a quandary for the large, dedicated Gator Nation contingency, who could have potentially faced the dilemma of having to choose between loading their cars and pickups to tailgate or packing up their homes to evacuate.
As Matthew gained steam, the call was made to cancel the Florida – LSU showdown, a game that could have serious SEC ranking and bowl implications. On a personal note, I understand why fans from both schools were undoubtedly saddened by this decision. But in hindsight, it was a smart call given the damage sustained in my own neighborhood, which is just an hour north of Gainesville.
A cancelled sports event can cost a college millions of dollars in lost revenue, not to mention the ancillary income from parking, souvenirs and other sources. (Photo: iStock)
An insurance policy on Mother Nature can be a good call
From an insurance standpoint, there are some implications, as well. As I wrote about this past June, insurance carriers often have some unique niche offerings related to sports. In that article, we focused on NFL draft insurance in the event of an injury. Today, we are going to take a look at game cancellation coverage.
For those who have ever attended a college football game, you can relate to the expenses incurred by athletic departments, especially when the revenues from that game are suddenly cancelled. From tickets and parking to concessions and merchandise, a cancelled game is a very costly proposition. To protect those at risk, various insurers have created just such a product to protect colleges from a catastrophic loss.
According to Dissinger Reed, an agency specializing in game coverage cancellation insurance, there have been several instances where entities have presented claims. In recent years, there have been examples of specific events covered, such as the dome collapse at the Minnesota Vikings game, a hurricane prior to an LSU home game, and wildfires for a home San Diego Chargers game. As recently as two months ago, the University of Florida had to cancel a game due to serious thunderstorms.
In the case of the recent hurricane cancellation, the University of Florida will likely present a claim against their policy which is covered by Lloyd's of London. To give you an example of the potential size of the claim, in 2014 the school lost $1.8 million dollars due to a cancellation against Idaho. Suffice it to say that the losses from a big SEC rivalry game will likely dwarf that figure.
Typically, these policies only cover the home team, as they have the most to lose financially. According to Christian Reed of Dissinger Reed, some policies will also cover hotel stays, food and transportation expenses if the game is played elsewhere.
Insurance coverage can be purchased to protect against of number of perils including hurricanes, earthquakes and acts of terrorism. (Photo: iStock)
The X's and O's of coverage
How does this coverage work? A policy is issued that will cover certain situations or perils. This could include wildfires, power outages, earthquakes, acts of terrorism or hurricanes to name a few. According to Dissinger Reed, for a relatively low cost premium, event cancellation insurance can protect lost revenue and/or additional expenses incurred due to the postponement or relocation of a game.
The agency indicates that with this type of coverage, an institution will receive benefits up to the limit of insurance for a loss that is a direct result of cancellation, abandonment, curtailment, postponement or relocation of the insured event to which this insurance applies.
The loss must be the direct result of an unexpected cause beyond your control, the control of the organizers of the insured event, the control of the attendees or exhibitors at the insured event, and the control of your financial supporters.
As is the case with many other types of insurance, the policies can be structured in a variety of ways. The loss could be covered from dollar one, or there could be a deductible, varying in size to help control the premium.
If a game can be rescheduled, that can help mitigate some of the losses incurred. (Photo: iStock)
What the claim looks like
From a claims perspective, it would be interesting to read the language of the policy, as there is a good chance that this game will be rescheduled for a later date and time. If there is simply a redo of a home game for the Gators, the actual realization of dollars lost would be somewhat mitigated. Conversely, if the venue is moved, not only are there lost dollars from the event, but there would be additional damages in the form of travel-related expenses.
Neither team has a mutual open date for the rest of the season. The outcome that the teams have mutually agreed to do is to drop their non-conference opponent on November 19th and instead play each other in a pivotal conference game, which has been moved from Gainesville to Baton Rouge, at an estimated cost of $7.8 million in lost revenue for the Gators.
In addition, Florida was to host Presbyterian College on that date. They have guaranteed $500,000 to that school, which would be paid under the SEC's lost revenue insurance policy.
The situation for LSU is a little more challenging. They were set to host South Alabama on November 19th, and that school will be guaranteed $1.5 million. According to the SEC policy, they would cover LSU's losses on ticket revenue, but not ancillary income such as parking, concessions or merchandise. But, with the game being moved to Baton Rouge, those losses may be mitigated.
As is often the case with insurance, the claims can be very complex. It is critical that anyone investigating these claims understand all of the terms of coverage and exclusions, while possibly looking for other potential insurance or considering viable rescheduling alternatives that could have an impact on the ultimate claim value.
Who knew that insurance could be so much fun! With that, I am checking this Saturday's weather, which is shaping up to be a beautiful day for football in Florida.
Christopher Tidball is a senior director-casualty solutions consultant with Mitchell International, a technology and software company focused on insurance solutions. He is a former claims executive and author of several claims related books including Re-Adjusted: 20 Essential Rules to Take Your Claims Organization From Ordinary to Extraordinary and the recently released thriller, Swoop & Squat.
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