By Roy Reichold
As meeting and event planners, procuring the correct insurance policy can be cumbersome, if not very confusing. My strongest advice to align yourself with an insurance professional that knows the hospitality industry and where an establishment or event may have exposure to risk.
One of the biggest misconceptions about insurance, in general, is that all policies are the same and all have the exact “all risk” coverages included. Hence, most buyers buy price versus coverage because the insurance industry has taught us to “spend 15 minutes or less, and save 20% on your insurance”. This can be very costly if the buyer does not know what is covered and, more importantly, what is not covered. These are called “exclusions”.
Risky Insurance Practices
Meeting planners know that every event has different exposures, such as providing transportation, food, entertainment, offsite adventures, liquor, and much more. One major danger that I see frequently, particularly in large venues, are companies that plan group functions where they want to be listed as an “additional insured” event on a venue’s policy. Imagine if a national college fraternity rents your venue and ends up maliciously destroying property, resulting in tens of thousands of dollars of repairs! Additional insured means your insurance policy, in this case, the meeting planner, responds and pays versus theirs, meaning the venue.
Beyond this limited level of knowledge, most companies merely check a box to ensure the words “insurance” and “additional insured” appear in the contract or lease. Then, they give no further thought about how much coverage is conferred or whether the words in the contract are sufficient to confer any insurance rights at all.
Additional Insured Policies
Moreover, most companies fail to recognize that the words in the contract or lease are crucially important in terms of setting the parameters for the additional insured coverage provided. Additional insured coverage can be very tricky depending on whether coverage is being given or received. Here are the following definitions that most meeting and event planners should familiarize themselves with:
An additional insured extends liability insurance coverage beyond the named insured (you) to include other individuals or groups. An additional insured endorsement protects the additional insured under the named insurer’s policy allowing them to file a claim if sued.
Most policyholders will, at some point, be required to add unrelated persons or organizations to their policies as additional insureds. The extent of coverage required to be provided is often vague at best, usually buried in a contract that seems to be written in Old English.
Among the many questions that arise, and often find their way into litigation, is the extent of coverage actually provided to the additional insured by the attached endorsement. In particular, it is often represented that the additional insured is being provided coverage only for liability arising out of activities of the named insured.
Liability Insurance Policies
Commercial General Liability is a standard insurance policy issued to business organizations to protect them against liability claims for bodily injury (BI) and property damage (PD) arising out of premises, operations, products, completed operations, advertising, and personal injury (PI) liability. General Liability protects the venue and responds to customers claims. Example would be if a guest slips and falls and suffers injury on ice that was neglected to be picked up.
Liquor Liability Insurance, also known as dram shop insurance, is liability coverage for businesses that serve, sell, distribute, manufacture, or supply alcoholic beverages. This protects policy holders from claims arising from direct liquor exposure. If a venue overserves a customer, and customer leaves and is involved in an automobile accident that results in death, the venue can be held liable.
Employment Practices Liability Insurance (EPLI) is a type of liability coverage that protects employees from wrongful acts arising from the employment process and guests of an establishment. The most frequent types of claims covered under such policies are wrongful termination, discrimination, sexual harassment, retaliation, and inappropriate workplace conduct. This includes (but is not limited to) employment-related defamation, invasion of privacy, failure to promote, deprivation of a career opportunity, and negligent evaluation. This policy covers directors and officers, management personnel, and employees as insureds.
In the era of #MeToo, the need for coverage that protects against sexual assault claims is becoming more and more important. These types of incidents are coming to light, and drinking establishments are one place where people try to take advantage of others.
Subspeciality Insurance Policies
Special Event Insurance is an insurance policy that helps protect an event planner’s investment for a specific event such as a festival or outside wedding. This particular insurance coverage may help cover their costs if they unexpectedly need to cancel because of weather or the entertainers cancel.
Assault and Battery Insurance is a somewhat narrow coverage, especially compared to general liability or similarly broad insurance policies. Nevertheless, assault and battery coverage frequently manages to provide protection against a number of different incidents that venues, bars, taverns, night clubs, and similar businesses may face. Many assault and battery insurance policies cover the classic bar fight, where two or more patrons go after each other (usually once they are intoxicated). A policy may cover both injuries sustained by those directly involved in the altercation, as well as injuries that bystanders sustain.
Assault and battery coverage is not always limited to only alterations that occur within an establishment’s building. Confrontations that occur near a building might also be covered, especially if they still begin on the business’ property, but the coverages that come with this policy are not just limited to physical injuries.
Coverage is sometimes also extended to emotional harm, which can include emotional harm sustained by witnesses. This can be an especially important protection, especially with the prevalence of lawsuits and increase in violence that the country is seeing. Assault-related lawsuits can come from people not directly involved in an altercation; they can also be filed by witnesses. Should an opportunistic witness that files a lawsuit be affected by violence, the resulting legal expenses can be significant.
Coronavirus and the Insurance Industry
The forced closure of businesses nationwide because of the novel coronavirus would seem to be the perfect scenario for filing a “business interruption” insurance claim. However, most companies will probably find it difficult to get an insurance payout because of policy changes made after the 2002-2003 SARS outbreak, according to insurance experts and regulators.
SARS, which infected 8,000 people mostly in Asia and is now seen as foreshadowing the current pandemic, led to millions of dollars in business-interruption insurance claims. As a result, many insurers added exclusions to standard commercial policies for losses caused by viruses or bacteria, and the added policy language will potentially allow insurance companies to avoid hundreds of billions of dollars in business-interruption claims because of COVID-19.
“Insurers realized they would not be able to cover such a broad-scale event,” says Robert Gordon, Senior Vice President at the American Property Casualty Insurance Association. “By its very definition, you can’t diversify the risk.”
Consult a Specialty Insurer
Making the current insurance situation even more complicated are the many different kinds of business insurance policies, some with boilerplate language and others filled with personalized exclusions and endorsements. Ultimately, I cannot stress enough to review your present and future rental contracts before committing to a policy and discuss all potential exposures with a broker or agent that specializes in your industry.
Roy R. Reichold is a Senior Risk Advisor for Lakenan. To learn more information, visit lakenan.com or call (573) 883-7446.