The pitfalls of not placing special-event coverage, when it’s truly needed and available, can result in catastrophic losses to your insured, and possibly even damage the credibility of your agency and errors and omissions coverage. You might think that an Insurance Services Office (ISO) commercial general liability (CGL) policy would do an excellent job of providing insurance protection to the sponsor or promoter of a private or public event. After all, a CGL policy comprehensively addresses the third-party bodily injury, property damage and personal injury exposures of an event. Insurers who specifically write policies for events believe the CGL policy perhaps does the job all too well, and they’re unwilling to provide the CGL without additional limitations and definitions.
Thus comes the impetus for special event insurance. What’s so special about it? It’s a special breed of CGL coverage, an insurance product that doesn’t come straight off the shelf. Agents and brokers who provide one-off event policies need to familiarize themselves with it, learning what protection is and is not offered by the altered CGL. Agents should also learn where to find the broadest policy available, augment that coverage where needed, and be able to educate their clients about the exposures they must retain and need to manage.
One further “special-ness” of special-event coverage stems from its very nature. The risks that occur at events involve varying numbers of people, often large, that participate in or watch activities such as sports, acts of daring, all genres of musical performance and theater, amusements like rides and games, dancing, walking and rallies. Events challenge their organizers to work fast, often under pressures of schedule, weather and budget. They require complex orchestration of people, equipment and resources. Event holders have the responsibility of safety and security of guests, volunteers and employees.
Event insurers analyze what they can risk or take on as part of the CGL. They review trends in loss and claims experience and decide what they need to charge for the insurance provided. With the intent that exposures are managed at an event, insurers take into account controls that should be in place.
Contracts play a major role in the transfer of event risk; the contract that carries a great deal of consequence for the promoter and the insurer is the premises lease contract. More often than not, an event holder enters into a lease agreement with a facility, city, county or parks department that owns or controls the site where the event will take place. This contract will have an indemnification clause which transfers to the lessee (the event holder) most of the liability for the premises and all event operations. This contractual responsibility is often triggered in a loss, and if brought into a suit the event holder doesn’t want to be “bare” of insurance protection nor take on the liability of another responsible party.
Special Event Endorsements
Many of the limiting endorsements attached to the special-event CGL address specific event operations that are a part of the overall event. Insurers exclude coverage for selected activities feeling that these operations would be better insured elsewhere and in addition priced accordingly. The event promoter will often hire independent service providers to perform operations and should be aware of the proper transfer of liability.
Not all special event endorsements are included in each event insurer’s policy, and those discussed in this article are only a sample. Individual insurers may also have their own manuscript form for a limiting endorsement, with language they feel best achieves their intended result. Besides endorsements that name the lessor as an additional insured, a few of the more common special event endorsements are discussed here.
Exclusion – Collapse of Temporary Structure. This includes structures such as tents, stages, bleachers, barricades and temporary fencing. This exclusion is very common in event policies. The insured must be aware that insurance is not provided to them if they, their employees, contracted labor or volunteers erect a tent or other temporary structure and a loss occurs that causes bodily injury or property damage to a third-party. Tenting, staging and event rental companies can be hired to put up necessary structures, and in doing so, the event holder should verify that insurance is in place and that a proper risk avoidance and transfer has taken place.
Exclusion – Seating, Fixtures and Glass. The ISO CGL provides third-party property damage coverage to the property of the leased event premise if the lease period is seven days or less. This exclusion, however, if endorsed, removes coverage for those items shown. The seating, fixture and glass exclusion is often used for concerts and stems from facility property losses. This exposure is impossible to transfer to a subcontractor. If there’s a concern, it could be managed in the lease or through possible loss-control methods.
Exclusion – Liquor Liability Amendment. Liquor or dram shop liability is excluded in the ISO CGL if the insured is profiting in any way from the distribution or sale of alcohol. If an insured is “hosting” alcohol the CGL is silent and the activity is not excluded by the standard ISO form. This coverage is known as “host” liquor liability.
When the amendment is attached to a policy, it will “strip” even the host coverage and create an absolute liquor exclusion. Thus, if liquor is hosted at the event and the insured were brought into a third-party bodily injury suit, the insured would have no defense or coverage.
To avoid alcohol-related exposure, the event holder can hire a third-party vendor to serve alcohol. The holder can also buy a separate liquor liability policy. Because of the severity of liquor-related claims, it’s also recommended that, in addition to the vendor showing evidence of liquor liability, the vendor also name the insured/event holder as an additional insured on their liquor policy.
Exclusion – Events with Live Performances of Rap/Hip Hop. This exposure is excluded by most special-event policies but can be mitigated differently by a variety of forms. Certainly coverage is available for these types of performances, but only with additional underwriting and usually at higher premium costs. A history related to battery and weapon assaults has given this entire genre a bad reputation. Promoters now pay a premium to find coverage in a limited marketplace. Underwriting requirements have been heightened as well, such as requiring metal detectors and pat-downs before entering the concert venue.
Exclusions – Athletic or Sports Participants with Respect to the Insured Operations. Coverage will not apply to bodily injury to a person while practicing or participating in any sports or athletic contest or exhibition. This exclusion is present in all event policies unless a specific athletic event policy is purchased. There is little room for interpretation. Neither insurance coverage nor defense costs are provided if a suit is brought against the event holder by an injured athletic participant — think softball game. Activities such as dance performances or cheerleading are also often interpreted as athletic activities by an insurer. When in doubt, agents should clarify their carrier’s interpretation of this exclusion.
Event insurers comfortable with athletic participant exposures will write a CGL policy without this exclusion, thus making the policy silent on this third-party class. Athletic participation also triggers additional underwriting. The insurer tailors premium pricing to the specific athletic exposure — the premiums to insure ski racers will be much higher than for marathon runners. Insurers will also usually require participant medical accident insurance to act as a buffer for possible litigation.
Exclusions – Assault & Battery. This is another common exclusion. An assault and battery endorsement releases insurers from the duty to defend claims made by third parties for this personal injury peril. Language varies among insurers. Producers should be familiar with how this endorsement may apply to their client’s operation. Event holders should reconsider using volunteers for “crowd control” and instead outsource this operation to a licensed and insured security company.
Exclusions – Bodily Injury to Independent Contractors. This endorsement varies by carrier, but excludes bodily injury-related claims from hired 1099 labor and independent contractors and their employees. In a perfect world, bodily injury incurred by independent workers during an event should be covered by the independent contractor’s workers’ compensation insurance. But most hired labor or sub-contracted sole proprietors will not have workers’ comp in force. This exclusion removes all coverage and defense costs for their possible third-party suits.
Event holders with this exclusion can try to protect themselves by requiring evidence of workers’ comp from all subcontractors, hiring labor from an agency that provides workers’ comp for their labor pool, or by making their 1099 labor at the event employees. A new insurance product targets this gap and sells workers’ comp to all event labor on a blanket basis if evidence is not shown. Without something like this, it’s best to remove this exclusion.
Exclusions – Medical Payments. Although medical payment coverage is defined and shown in the ISO CGL, it is then excluded by this endorsement. Because events involve the gathering of a large number of people, many insurers don’t wish to be contractually bound to pay claims regardless of their insured’s fault. Trips and falls are the most common loss occurrences at events. Full policy limits are still available for bodily injury-related claims when negligence is the trigger and the occurrence is covered by the policy.
There are a number of special event coverage specialists in the insurance industry that can help. Plus, a number of insurance products and programs allow you to augment an event CGL. Additional insurance coverages to consider include event cancellation, inland marine property, crime insurance, and first party volunteer accident insurance. All these options should be considered by the event holder and their agent in providing insurance protection for the myriad of hazards and exposures when putting on a “special” event.