It's been nearly three months since COVID-19 began spreading rapidly in the United States, forcing widespread cancellation of events such as concerts, sports events, and conventions. If your organization purchased event cancellation insurance (including the rider for communicable disease coverage), then you may have the opportunity to avoid a major hit to your revenue that would otherwise result from cancellation, postponement, or reduced attendance. Many in this position have already provided notice to their insurance carrier and are well under way in the claim adjusting process. But many are just getting started, now that it appears government and corporate restrictions related to COVID-19 will impact events for the remainder of 2020 and potentially into 2021.
As businesses, associations, and other nonprofit organizations make their way through the event cancellation claim process, there are several best practices to keep in mind.
If You Haven't Already, Provide Notice Now
Some event cancellation policies require an insured to provide notice to the carrier once the insured is aware of circumstances that may lead to a claim. At this point, it is clear that COVID-19, at the very least, may have an impact on any event scheduled for the foreseeable future. So even if you are not sure how it will affect your event (for example, whether or not you have decided to cancel the event), you should work with your broker to promptly provide notice to your carrier.
Early Communication Will Help Reach Early Resolution
Your insurance carrier will likely appoint a third-party adjuster once you tender notice. The adjuster generally acts as the carrier's representative throughout the claim process. Insureds should communicate early and often with the adjuster and, when possible, obtain the adjuster's consent before making claim-impacting decisions (for example, cancelling the event or related contracts, providing refunds to attendees/exhibitors/sponsors, etc.). Securing the adjuster's consent prior to decision-making will help to avoid potential disputes related to such decisions down the road. In addition, early and frequent communication with the adjuster can provide the opportunity for collaborative decision-making that mitigates losses for both the insured and the carrier.
Be Prepared to Support Your Claim with Documentation
An insured must support its claim calculation with documentation, such as invoices, copies of checks, bank statements, and financial information from previous years' events. Make sure you have documentation to back up every aspect of your claim.
In addition, the adjuster will likely request documentation to confirm that you have complied with your obligation to make all reasonable attempts to mitigate losses associated with the claim. This includes efforts to invoke force majeure for relevant contracts and to reschedule the event. If your communications related to these efforts occur over the phone with your vendors, make sure to follow up with emails or other written communications so you can show the adjuster that you have taken all reasonable steps to mitigate the claim amount.
Don't Settle for Less Than You Are Owed
Remember that the adjuster is hired by the insurance carrier to protect the carrier's best interests. On top of this, most event cancellation policies contain a bare-bones "calculation of loss" formula. There may be little guidance within the policy, or in available case law, to determine whether specific revenue or expenses should be included in the calculation. Adjusters may try to use this ambiguity to their advantage to minimize the claim amount. Insureds should take a hard look at the adjuster's loss calculation to see if it improperly reduces the amount of the claim.
Venable continues to support dozens of clients with event cancellation claims and related issues, obtaining favorable coverage determinations on behalf of many. Please contact the authors of this alert if you would like assistance with these matters.