After Superstorm Sandy’s incredible storm surge and high winds, the restoration and cleanup continue in full force while many are still without communications, power, water and fuel.
There is no doubt that the consequences of Sandy and her aftermath will be seen and felt for months to come, and in the world of insurance, there are few areas that will be more impacted than Event Cancellation/Contingency products, which provide coverage for specific events at designated times and venues. These policies cover a broad spectrum of both indoor and outdoor events from concerts, conventions and festivals to marathons, sporting events and cruises. They provide coverage for losses resulting from cancellation, abandonment, curtailment, postponement, relocation or the enforced reduced attendance of an insured event. The policies typically cover loss of expenditures, unrealized revenue and, on occasion, lost profits.
Applicability usually comes down to whether the cancellation, postponement, relocation curtailment or enforced reduced attendance 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 (1) whether an event had to be cancelled versus postponed or relocated to a different place or time, (2) the travel restrictions that were in place due to the storm, and (3) for enforced reduced attendance, whether the reduction in attendance was solely and directly a result of the storm. It can be further expected that claims may be submitted for losses sustained as a result of the fuel shortage, and insurers must pay close attention to the wording of their policies to determine if and when coverage may exist for such claims.
Event Cancellation policies typically contain multiple exclusions that may include the circumstances of loss and categories of damage that will be associated with Superstorm Sandy. Without a specific provision providing coverage for enforced reduced attendance, it is important to note that inadequate attendance or insufficient interest prior to the event is typically excluded from coverage. For covered events and losses, there are exclusions that apply to the type of personal property that is covered.
In cases where the claim may be covered, certain losses could be disputed. For example, many claim disputes focus on the insured’s duty to mitigate its losses by either relocating or rescheduling the event. Indeed, in the aftermath of Hurricane Katrina, one of the many issues that arose under this type of coverage had to do with insureds cancelling events in total that could have been postponed and/or relocated, thus reducing the loss amount being claimed. Moreover, revenue anticipated and revenue lost are typical subject matters of claim evaluation.
The losses associated with Event Cancellation insurance as a result of Superstorm Sandy may prove to be unprecedented, given the widespread geographic area affected. Wilson Elser’s Insurance & Reinsurance Coverage practice is experienced in analyzing these claims and available to assist.