The bombings that occurred during the Boston Marathon, resulting in loss of life and numerous injuries, have been designated a terrorist act. The consequences of the bombings, as well as the ongoing investigation and clean-up, can be expected to impact Event Cancellation/Contingency policies. These policies provide coverage for specific events at designated times and venues and can cover a broad spectrum of both indoor and outdoor events from concerts and conventions to marathons and sporting events. There have been several sporting event cancellations as a result of the bombings, including the Boston Bruins hockey game that same evening and the Boston Celtics basketball game the following evening.
Event Cancellation/Contingency policies typically provide coverage for losses resulting from cancellation, abandonment, curtailment, postponement, relocation or the enforced reduced attendance of an insured event, which may include the inability to travel to the insured event. The policies typically cover loss of expenditures, unrealized revenue and, on occasion, lost profits.
The applicability of coverage in the first instance usually comes down to whether the cancellation, postponement, relocation or other action is the result of a cause beyond the control of the organizers and attendees of the event. Insurers will need to focus their inquiries on whether an event had to be cancelled versus postponed or relocated to a different place and time and the travel restrictions that were in place. For enforced reduced attendance, the issue is whether the reduction in attendance was solely and directly a result of the Boston bombings and follow-up actions taken by governmental authorities in connection with such bombings.
Importantly, Event Cancellation/Contingency policies typically contain multiple exclusions that may include the circumstances of loss and categories of damage that will be associated with such loss. In particular, many policies contain a Terrorism exclusion that excludes coverage for any cancellation, abandonment, relocation or other action that takes place as a result of a terrorist act, which will typically be a defined term in the policy. Terrorism exclusions usually extend to any action taken to prevent, control or suppress such terrorist act or threat. For example, the act of shutting down public transportation by the local police or municipality in an effort to control or prevent another terrorist act from occurring, or as part of an investigation into the terrorist act, may fall under the exclusion. The bombings that occurred in Boston have been classified as an act of terrorism and would most likely meet the definition of a terrorist act that is found in most Event Cancellation/Contingency insurance policies.
While terrorism is typically an excluded act, there are instances in which acts of terrorism may be a covered event by endorsement or an extension of coverage. Under these circumstances, it is important to carefully review such endorsements or extensions as they may contain conditions or limitations such as geographic area limitations (25 miles from terrorist act) or a requirement that the terrorist act occur within a certain number of days from the commencement of the event. Further, it is important to recognize that even if there is potential coverage for losses due to a terrorist act, the cancellation, abandonment or other action must still be the result of a cause beyond the control of the insureds, attendees or organizers of the event. It is of further note that without a specific provision providing coverage for enforced reduced attendance, inadequate attendance or insufficient interest prior to the event is typically excluded from coverage.
Claim Disputes & Coverage Issues
In cases where the claim is covered, certain losses may be disputed. Many claim disputes focus on the insured’s duty to mitigate its losses by relocating, postponing or rescheduling the event to another time and place and thereby reducing the overall loss amount being claimed.
The claimed losses associated with Event Cancellation insurance as a result of the terrorist act at the Boston Marathon may prove to involve complex coverage issues.