The current situation of the Covid-19 pandemic has caused the cancellation and postponement of numerous expensive and otherwise profitable major business, sporting and entertainment events. The losers have ranged from professional conference organisers, sports governing bodies such as the Premier League, theatre and film production companies, and parties involved in the supply chains.
The prudent may have taken out event cancellation insurance cover as part of their risk management strategy. The more prudent, the better advised or in all likelihood simply the luckier ones, may have cover that does not exclude communicable diseases.
There is a developed market in event cancellation insurance products and policy wordings, with cover offered by major corporate insurers and Lloyds Syndicates and available directly or through specialist brokers. Policies are typically written on a single-event basis, a multiple-event basis or an annual basis. The cover may comprise first party loss cover and/or third-party liability cover. Event cancellation is a special financial lines underwriting risk and is very unlikely to be covered by general words in more general policies.
Cover typically attaches where an event is “cancelled, postponed, abandoned, curtailed or relocated”. It is normally a policy requirement that this occurs as a “sole and direct result” of a cause which is entirely beyond the insured’s control. The operative clause may of course vary from policy to policy.
The measure of indemnity is written on a number of alternative bases. Cover may be bought on a “gross revenue” basis, on a “gross profit” basis or on an “expenses-only” basis. The basis of cover offered is an underwriting issue and will be reflected in the premium charged. In some cases, policies offer an alternative of profits or “irrecoverable expenses”. Many policies offer additional cover for mitigation losses incurred to prevent or, more likely minimize, loss otherwise recoverable under the policy; e.g. re-arrangement costs following postponement rather than cancellation.
Will cancellation, or postponement, for reasons related to the Covd-19 pandemic, such as travel and gathering restrictions, trigger a successful claim under an event cancellation policy? The answer is, as is so often the case, that it depends on the policy wording, and specifically on whether there is a communicable diseases exclusion and its scope.
Some policy wordings provide a general cover subject only to typical market exclusions such as terrorism, financial failure of a supplier, trading risks such as lack of sales, interest, support or finance and protracted industrial action. Other policies contain a specific communicable disease exclusion, some of which refer specifically to “any strain, virus or syndrome that is related to influenza”. The origin of these clauses is likely to have been the previous and far less serious and widespread outbreaks of SARS and “bird flu”.
Policyholders suffering loss from events cancelled or postponed due to the current Covid-19 pandemic and the associated travel restrictions, government orders and Coronavirus primary and secondary legislation, and insurers who have written covers, would therefore be well-advised to consult their policies and to take experienced technical legal advice on policy coverage when notifying or defending a claim.