YOU'VE NAILED DOWN the venue, secured the hotel rooms, booked the speakers and signed the contracts. But as we learned so graphically on Sept. 11 last year, some things are beyond even the best planner's control.
What if the show can't go on? The consequences — particularly for a corporation staking big bucks on a marketing event or for an association that gains most of its revenue from an annual conference — can be dire. One safety net is event cancellation insurance, which can protect your event investment against snowstorms, strikes, earthquakes and other catastrophes.
Known as “business interruption insurance” in other industries, cancellation policies are valuable even when an event isn't a complete wash. Paulette Norman, assistant vice president of insurance company Seabury & Smith, Park Ridge, Ill., says it's important to keep in mind that claims can be filed for expenditures due to unforeseen circumstances. For example, she says, a group meeting in Dallas during a heat wave was worried that attendees wouldn't want to make the open-air walk from their hotels to the convention center. Its policy covered the cost of air-conditioned busses to ferry attendees back and forth.
Whether planners should invest in cancellation insurance depends upon how important an event is to an association or corporation financially and what kind of risk it is assuming. “If you're holding a board of directors meeting for 65 people that wouldn't generate income and was inexpensive to hold, there's no point,” explains James M. Goldberg, an attorney with Washington-based Goldberg & Associates. “But if it's a big annual event for 3,000 people that's a major source of revenue, definitely think about insuring.”
“It's a calculation,” agrees Jonathan T. Howe of the Chicago-based law firm of Howe & Hutton Ltd. “If you're holding an event for 12 people, it's probably not worth it. But if the event is for 1,200, definitely.”
Planners can't rely on a venue's liability coverage. Howe notes that if a convention center burns down, the venue's policy will help the owner construct another building — but it won't help a displaced conference find another meeting site. Likewise, a liability policy would cover the group if someone were injured at the meeting, Goldberg says, but wouldn't help a canceled event recoup lost profits and expenses.
COVERAGE AND COST
The rule of thumb is that cancellation insurance covers perils that are beyond the control of a planner, such as inclement weather, a principal speaker dropping out, strikes, outbreaks of disease and so on.
What the insurance won't cover is poor planning. You can't buy a policy to cover meetings scrapped because a company went bankrupt or losses due to low attendance because of a lack of interest or poor marketing.
The cost of a policy depends on variables such as where and when the meeting is scheduled and the budget. In the wake of 9/11, the standard cost of about 45 cents per $100 of exposure has doubled, according to Eileen Hoffman, assistant vice president of Aon Association Services, Washington. The cost varies with the season, with prices higher in winter than in spring, summer and fall. Coverage for areas at risk for earthquake and severe weather such as hurricanes can rise above $1 per $100 of exposure. “It's all about timing and location,” Hoffman adds.
Because it is a smaller, more specialized market, cancellation insurance isn't standardized, as term life insurance is, and it is written on a policy-by-policy basis, says Goldberg, who estimates that about half his meeting clients purchase insurance. He notes that policies can cover multiple meetings or just one event.
WHEN TO BUY
The earlier you purchase cancellation insurance, the sooner it can start working for you. Hoffman says coverage begins as soon as premiums are paid and extends to five days after the event, to cover things such as extra expenses if hired trucks or moving people don't show to break down exhibits. The insurance can be purchased up to one month before an event begins or as far out as a year in advance. Coverage purchased well before an event can be vital if something happens to the facility at which your event is booked, she notes, explaining that the policy would cover costs incurred to relocate.
Lou Novick, president of Rockville, Md.-based Novick Group, remembers one group with a conference planned at the Fontainebleu in Miami not long after Hurricane Andrew. The group was able to file a claim to cover $100,000 in expenses for moving events to other hotels in the area, and another $10,000 to inform attendees of the changes.
Insurance also is usually less expensive if purchased far in advance. Insurers increase the price, theorizing that the closer the event is, the more desperate a group must be for coverage.
Goldberg urges planners not to make a commitment before getting at least two price quotes and reviewing the policies carefully to determine what is not covered. “For example, some companies opted to exclude coverage for terrorist attacks and incidents,” he notes.
Michelle Holmes, vice president of Washington-based Rust Insurance, adds that 9/11 was “devastating” for this class of insurance business. She cautions, “In my opinion, another major catastrophe could make this coverage unobtainable.”
THE BOTTOM LINE
Above all, everyone interviewed agrees that planners should, at the very least, consider a cancellation policy if their event is of fiscal importance to the organization — even though, as Novick notes, less than one percent of those who take out policies file claims.
“You're going to see an even greater trend toward this kind of coverage thanks to the volatile nature of the financial market,” Holmes predicts. “People are less willing to take the loss upon themselves.”
Beth Negus Viveiros is executive editor of Direct magazine, a sister publication to Special Events Magazine.
FOR MORE INFORMATION
Event Cancellation Insurance
Aon Association Services
800/424-8830, Ext. 333
contact: Eileen Hoffman
Seabury & Smith
800/323-2106, Ext. 34271
contact: Paulette Norman
Rust Insurance Agency Inc.
contact: Michelle Holmes or Laura Johnson