How to understand event cancellation coverage for retreat centers, camps and other business organizations
Updated February 2024
“We’re sorry to inform you…”; “due to unforeseen circumstances…”; “your tickets will be refunded…”, and the list goes on with numerous cancellations over the past two years. We can all relate to the disappointment of having a planned event cancelled and usually do not consider any further than how to get our money back if we have paid to attend. But for the business owner, an event cancellation creates multiple stresses related to irate customers, loss of income, and even liability issues that could arise from contractual agreements.
Is there a way to address the hazards associated with cancelling special events?
Fortunately, the insurance industry has found a way to mitigate the risk with a specialized coverage called Event Insurance and Event Cancellation Insurance. We will examine some valuable information in understanding how to secure the proper coverage for your organization.
What is event coverage?
“Event insurance provides coverage for the sponsor of public or private events such as concerts, festivals, conferences, trade shows, sporting events, and celebrations to name a few. Available coverage includes property, general liability, employer’s liability, and cancellation insurance.” (https://www.irmi.com/term/insurance-definitions/event-insurance)
Events are typically short-term or may even be only a day long, so an event policy may be written to cover the actual timeframe for the event. Some organizations may have some limited extensions of coverage under Loss of Business Income and Operations Liability, but this would apply more to organizations such as camps and retreat centers which have multiple scheduled events over a policy period. These supplemental coverage options are limited in scope and in most cases do not provide the broader coverage afforded by an Event Cancellation policy.
Why Business Interruption Coverage may not be enough:
Business Interruption coverage is an endorsement usually added to a property policy to cover for Earnings and Expenses that result from a physical loss to the insured property. If your owned structure that is listed on your policy becomes damaged through a physical loss such as tornado or fire, then you could possibly have coverage for some loss of income or extra expenses due to cancellation of events. This recently became a subject of controversy for insurance companies when business owners felt that this coverage should apply to COVID-related shutdowns. In most cases, however, claims for these damages were denied because there was no direct loss to the property. The fallout from the COVID experience resulted in many companies adding policy language to specifically exclude coverage for infectious diseases under the business interruption coverage. (https://www.iii.org/insuranceindustry.blog)
What are the benefits of Event Cancellation Insurance?
Unlike Business Interruption coverage, Event Cancellation policies are broader in scope of coverage offered. Because organizations are not usually required to purchase this coverage, the policy is more specialized and offers coverage for various losses such as weather issues, natural catastrophes, labor disputes involving third-party vendors, terrorism, non-appearance of performers or personalities scheduled for an event. Some policies may even offer an endorsement for a communicable disease outbreak (this will involve additional premiums and will still include specific coverage stipulations). Each event is written based on the type of event being hosted, how much economic impact the event will have on the sponsor/owner of the venue, dates, location, and if the event is being held outdoors.
Although Event Cancellation coverage is valuable for sponsors, planners, and promoters, there are some risks that are not covered with this type of policy. Pre-existing circumstances (this almost universally will include COVID), pollution or contamination, war, or lack or interest are not covered perils under the policy (kandkinsurance.com ). The best way to understand what is and is not covered under Event Cancellation is to visit with an insurance professional who has experience with writing this coverage.
As a planner, you may want to consider specific events that you schedule where there is a considerable financial investment and risk for loss resulting from cancellation. Your local insurance agent can sit down with you and help you determine when you should purchase event insurance and even when you may want to suggest that a hosting organization would want to consider this coverage. We are happy to visit with you about your needs today. Feel free to reach out and call us at 417-881-1661 or 1-800-743-7205. We look forward to being of assistance!