The New York Road Runners — a non-profit community running group and the organizer of the annual New York City Marathon — could get millions of dollars in insurance proceeds thanks to its event cancellation coverage.
The New York Road Runners has been negotiating with insurers, Lloyd’s and its syndicates, following the cancellation of the race in the wake of Superstorm Sandy. This year’s race was originally scheduled for Nov. 4.
The settlement discussion has at time been rocky — Benjamin Lawsky, New York State’s superintendent of financial services, has recently gotten involved and is trying to mediate the ongoing talk, according to a report this week from The Wall Street Journal.
A source within the Lloyd’s also told Insurance Journal that Lloyd’s underwriters have accepted liability to the claim and that they are in the process of adjusting. The source, who declined to be identified, also said a large insurance payment has recently been authorized to the New York Road Runners in good faith.
The New York Road Runners generates more than $20 million in revenues from the New York City Marathon every year, according to The Wall Street Journal. Every year, the group receives some $250 in fees from each of the approximately 60,000 runners who participate in the race, though these fees are non-refundable even if the event gets cancelled. The group may offer this year’s registered runners entry into next year’s marathon or the New York City half-marathon next March.
“We have been listening carefully to everyone with an interest in the marathon — runners from New York City, across the nation, and abroad; charities; sponsors; broadcast partners; our international travel partners; and many others who we’re proud to collaborate with for the event that means so much to all of us and to the City of New York,” the New York Road Runners said in a statement.
“We are carefully considering everyone’s views and preferences, which are varied and extensive, and are working diligently with our insurers in the hope that we can provide the best response possible in as timely a manner as possible. Unfortunately, dealing with insurers takes time. We wish that this weren’t the case, and we’ve been pressing our insurers to act quickly and responsibly,” the group stated.
Event Cancellation Coverage
There are many different Lloyd’s syndicates that write the event cancellation insurance business, referred to as contingency cover in Lloyd’s, according to Scott Schachter, vice president within Marsh’s entertainment and events practice.
Some of the largest Lloyd’s syndicates writing this business are HCC, Beazley and Hiscox — and one of them may well be on the lead on this coverage for the New York Road Runners, he said. (Marsh was not involved in the placement of this coverage.)
“The way these programs work is a lot like a layered property program where you have one carrier who’s writing the first x-million dollars, and the next carriers will come in up the tower,” said Schachter.
“The way these programs are typically written is tiered. You have somebody who is leading the program with the terms and conditions, and the rest of the carriers will follow with those terms and conditions, with different pricing. So you have potential involvements of lots of different Lloyd’s syndicates who are going to have to write checks. So they internally need to get together.”
The event cancellation policy differs from a standard property policy and business interruption coverage in that in a standard property program, the insured needs to have physical damage and a loss of use of a space in order to trigger a loss. Schachter explained that an event cancellation policy doesn’t need that, and that the policy language typically says a loss can be triggered by any number of factors that are outside of the insured’s control.
Schachter said it’s possible that the amount that’s eventually paid to the New York Road Runners could be upwards of $10 million or $15 million.
“My take on this is that there may be some sublimits. There could be interpretation problems about what triggered the loss,” he said.
“Was it a civil authority situation, or was it really the storm? And each one of those could have sublimits. So they may have a very large policy limit for adverse weather, but was it really the adverse weather that caused this?”
He said, “I can’t speak to the policy terms here. But my take is that it appears that whoever is leading this has acknowledged that at least some of it is covered. But there may have been a sublimit which they believe is potentially covering this and not the full policy limit.”