COVID-19 and Event Insurance: What You Need to Know

COVID-19 and Event Insurance: What You Need to Know

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Our industry is going through unprecedented times. The COVID-19 outbreak has impacted every aspect of our lives, and with the number of worldwide cases still rising, it looks like things will stay this way for the foreseeable future.

In fact, a new research study investigating the impact of the Coronavirus outbreak on the events industry has found that the majority of 2020 events have now been cancelled or postponed with 47% of event planners moving them to the end of the year and another 21% to the following year.

Social distancing regulations put in place for our safety and well-being have meant that organisers all around the world are having to make difficult decisions in a constantly changing environment.  Many are also having to deal with the financial consequences of cancelling and rescheduling events – which adds another level of burden especially when it comes to dealing with insurance cover.

So what are some of the critical things organisers need to understand about event insurance in the current climate?  What should you realistically expect from your insurance provider if you’re cancelling an event and how can you prepare for the future?  We spoke to insurance expert, Kris Barnfather from Eggar Forrester Creative to find out.

Cancelled Events: What Can Your Insurance Do for You?

This Coronavirus pandemic has brought with it an extraordinary set of circumstances, there’s no disputing it. With the unprecedented size and spread of this outbreak, insurers are currently being faced with a dilemma. Generally speaking, pandemics of this nature would usually be excluded under normal event insurance policies. It would, however, be written under the optional ‘communicable disease’ extension which is made to cover event cancellations due to contagious diseases preventing the use of venues or the gathering of crowds.

Unfortunately, given the severity of the pandemic, events have now had to be cancelled en masse. The risks posed by the Coronavirus spread consequently means it’s unlikely for any insurer to be seen writing additional cover for event cancellation due to COVID-19, or any other strain of Coronavirus, at any point in the foreseeable future.

This means, for event insurance to cover cancellations due to Coronavirus, the initial policy and additional communicable disease extension would have to have been taken out prior to the current outbreak. A recent example of this is the Wimbledon Championships. The tournament unfortunately had to be cancelled this year due to Coronavirus, however, long before the outbreak, organisers had taken out the communicable diseases extension alongside their policy – effectively insuring them against this pandemic. Consequently, they were able to claim for the cancellation and are poised to earn a substantial pay-out as a result.

As it stands today, the general consensus amongst insurers is that they will continue to offer a communicable disease extension to their policies – however, this will likely come with stipulations. From now on, the communicable disease extensions would only cover a specific list of diseases – and COVID-19 or other Coronavirus strains are unlikely to be included.

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Force Majeure: What is It?

Given the information included above, the question is if there is anything at all in your insurance policy that can protect you from Coronavirus related cancellations. The term ‘force majeure’ may be familiar to some. Its literal translation means “superior force” and it is often used as a sort of get out clause in certain contracts. The term itself describes any event that happens outside of your reasonable control that goes on to disrupt your ability to fulfil a legal obligation.

To qualify as a force majeure, an occurrence must be unexpected, external and genuinely impossible to overcome. If proven, this clause will allow businesses to escape from contractual obligations without being penalised – which is why many event organisers may find themselves looking for this in their policies.

Force Majeure and Event Insurance

A ‘force majeure’ clause may cover a number of things, including natural disasters, civil unrest or even infectious diseases. However, it is not a failsafe option. Even though many see force majeure as a simple ‘get out of anything for free’ card, this is ultimately not the case. A force majeure event always has to be proven, which is a challenging feat in many cases. The unforeseeable event has to be clearly shown to make it impossible for you to carry out your obligations as stated in your contract – and this is often hard to prove.

More so, many find that if force majeure is used in the context of legal contracts or insurance policies, it is no longer done so in such general terms. In fact, it is entirely commonplace for contacts to be very specific when outlining the parameters of a force majeure. In other words, a force majeure can only really take on the meaning of whatever is specified in your contract.

With all this in mind, it may not spell out good news for event organisers who are currently being impacted by the Coronavirus spread. For force majeure to be of any legitimate protection for you during this time, your insurance policy would have to include communicable diseases and pandemics under its terms. The likelihood of this happening will vary case by case but is fairly uncommon. In fact, since insurance policies are created to be as accurate and specific as possible, it isn’t unheard of for epidemics of infectious diseases like SARS and Coronavirus to be explicitly excluded from the terms of coverage.

It is an unfortunate fact that insurance policies may not be of much value to many event organisers right now. There is good news, however, for the organisers who took out insurance and also chose to add a communicable disease extension on top before the COVID-19 outbreak. In these cases, policies should cover them for cancellations and other issues that have happened as a result of this pandemic.

Looking Ahead

This is the consensus as it stands right now. However, it is an ongoing situation that we are monitoring closely. It’s unknown how long Coronavirus will continue to affect event organisers, but what we do know is this: when the time comes for events to go ahead once more, it’s prudent to enlist the help of a specialist event insurance broker who can discuss and advise on the available options. And when dealing with specific notifiable diseases, it is important to remember that insurers will constantly update their cover.  Your insurance broker will highlight how cover can be sourced and what specifically cannot be covered.

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