A concert promoter cancels a sold-out show of a world-renowned recording artist, reimbursing millions of dollars in ticket sales as a result.  If the reason for the cancellation was COVID-19, does insurance cover that?

Event Cancellation Insurance Basics

Event cancellation insurance generally provides coverage only when there has been a triggering event under the policy.  Some policies are written, for example, to only cover cancellations caused by rain or bad weather.  Other event cancellation policies are all-risk policies, meaning that coverage may be triggered by any cause that is not specifically excluded.  For all types of event cancellation insurance, the triggering event must have been fortuitous, or outside of the policyholder’s control.

Good News for Policyholders

The good news for policyholders is that many all-risk event cancellation policies do cover cancellations caused by COVID-19 related shut-down orders.  For such policies, a shut-down order should qualify as a fortuitous triggering event.  Across the United States, nearly every jurisdiction has enacted some kind of order that caused the cancellation of large-scale events.

Notes of Caution

Policyholders should be cautious concerning the scope of exclusions in respect of viruses and communicable diseases.  Although these types of exclusions may bar coverage related to COVID-19, it is important to be mindful of variations in the exclusion language used.  Some exclusions apply to only specific named viruses, such as SARS and MERS.  Other exclusions contain carve-outs that may be applicable to COVID-19.

What Should Policyholders Do

Above all, policyholders of event cancellation insurance should take immediate steps to preserve their claims:

  1. Give notice.  Notice is a prerequisite for coverage under almost all insurance.  Make sure the insurer treats the notice as a notification.
  2. Document everything.  A policyholder filing an event cancellation claim will eventually have to prove its losses.  Maintaining accurate documentation in real time is the best practice.
  3. Get Help.  Policyholders, even sophisticated businesses, are generally inexperienced in filing insurance claims.  On the other hand, insurance companies respond to claims on a regular basis; this is their business.  For this reason, policyholders must plan a strategy for presenting their claim.

Reed Smith attorneys Mark Pring (London) and Anthony Crawford (New York) discuss event cancellation insurance in their recent podcast.  Mark and Anthony also address issues business interruption claims under U.S. and English law.