Special Risks / Contingency / Surplus Lines

Notes On Cancellation Insurance

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Contingencies which might result in full or partial cancellation

• Outbreaks of civil disorder, revolution, war etc. - These may also have indirect effects, for example  by causing diversion of flights.
• Unforeseen political events such as coups or disputes with other countries causing withdrawal of visa facilities or closure of borders.
• Cancellation at specific venues due to fire, collapse, storm, flooding etc., involving extra expense due to change of venue or outright cancellation;
• Death of Head of State or a member of his family causing periods of official mourning.
• Outbreaks of infectious diseases leading to quarantines or restricted access;
• Adverse Weather conditions disrupting air, sea and rail transport, or affecting outdoor activities. Where adverse Weather is covered it is generally the case that underwriters will not quote less than 14 days prior to the event. This is to elimintate selection against the insurer.
• Strikes causing disruption to scheduled air services or at airports.
• Participants who fail to turn up due to illness, delays or other problems.
• Delay and disruption to travel arrangements - what happens if there is a group stranded at the airport by bad Weather?  Who pays for the food and drink, entertainment and accommodation?
• Failure of key elements in the organization such as power supplies .
• Terrorism, which may cause security alerts, and may dissuade people from traveling.
• Inability to leave the venue at the planned time which might incur penalties.
• Loss of Reputation - it may be necessary to incur expenses in order to preserve the reputation of the event for next time.
• Damage to the venue.

How is the Loss Calculated?

Under Standard Cover the loss (net of recoveries) is calculated by the addition of the following elements:

Lost Expenses

The total of Budgeted Expenses incurred which are have been irrevocably expended in connection with the event.

Cost of Advising all concerned

The essential and reasonable costs incurred in advising all persons who need to know that there are problems associated with the holding of the event.

Remedial Action Costs and Additional Expenses

Remedial Action Costs are the reasonable additional costs incurred in attempting to prevent or minimize any loss. Expenses incurred without the Underwriters consent are limited to the extent that it is proven that the loss was reduced.

Other out of pocket additional expenses incurred as the direct result of an insured loss are also covered up to 25% of the Limit of Indemnity. This is designed to pick up other directly incurred costs arising from an insured loss.

Penalties for Failure to Vacate

The cost of claims for compensation substantiated against the Insured by the owners or management of the venue under the tenancy agreement and arising from failure to vacate.

The maximum sub-limit payable under this clause is 40% of the Limit of Indemnity.

Contingent Responsibilities

The loss to the Insured arising from written financial undertakings made or guarantees given in connection with the possible non-utilization of facilities or services which have been pre-booked on behalf of others.

This applies to such pre-booked commitments which are essential for holding the event, do not appear in the budget, and are intended to be discharged by persons other than the Insured if the event takes place as planned.

The maximum sub-limit payable under this clause is 40% of the Limit of Indemnity.

Other Special Features: Modified Under-insurance Provision

Underwriters recognize that there are often changes made to budgets which cannot be foreseen at the outset. To assist organizers, this provision is not applied if the amount of any under-insurance is less than 10%.

However, as with most insurances, it is important to maintain insurance for the full value of any potential loss. With incentives and similar events, this will normally be the total budgeted expenditure for the event.

Emergency Remedial Action

The insurance recognizes that organizers may have to act immediately to deal with disruptions to planned schedules, which may occur on the opposite side of the World in circumstances where it is not possible to contact a loss adjuster.

The policy therefore makes provision to enable the Insured to act to take whatever prudent and necessary emergency steps are required in order to maintain the quality of the event as closely as possible to the original itinerary and program, provided they make contact with the insurers as soon as practicable.

Extensions to Standard Cover:

The Standard Cover can be extended to include various additional benefits to tailor the cover the needs of the Insured and events. These are not actually additional perils since the standard wording is already very wide. However, they are additional indemnities because the sums at risk are generally outside the budget for the Event.

Travel Delay Expenses

This is the additional expenses incurred to provide sustenance, travel and accommodation of an equivalent standard to that planned, as the result of the delay, diversion , disruption or cancellation of the pre-planned transportation in which invitees or delegates were intending to travel in the course of their journey to or from any part of the event. Other reasonable out of pocket expenses incurred as a direct result are also covered.

The benefit payable depends upon the length of the delay . A scale of delay/benefits is agreed for each client, and is in addition to the Limit of Indemnity.

A suggested scale might be:

• After 2 hours delay : $25 per person
• After 4 hours delay : $60 per person
• After 8 hours delay : 25% of the Limit of Indemnity
• A deductible applies according to the size of the event with a minimum deductible of $200.

Enforced Extended Stay Additional Expenses

These are the additional costs incurred in providing sustenance, travel and accommodation of an equivalent standard as the result of the enforced inability of invitees or delegates to leave the venue at the originally planned time as the result of an insured peril. A deductible applies depending on the size of the event.

The maximum sub-limit payable under this clause is 25% of the Limit of Indemnity, but is in addition to the Limit of Indemnity.

Compensation for Reduction in Quality

This is a unique coverage designed to help maintain the relationship between the insured company and its invitees or delegates. It is designed as an extension for events where there is no gross revenue, that is generally incentive events, which are designed to motivate, and presentations designed to impress.

The compensation can include all agreed sums paid or the cost of other forms of compensation considered to be commercially justified and necessary to pay to individual invitees or delegates who suffer a loss of enjoyment as the result of a reduction in the quality of the event agreed between the Insured and the Underwriters following an insured loss.

Such compensation is measured by reference to variations from the planned itinerary and program, taking into account the value of remedial action taken by the Insured, and due to circumstances beyond the control of those involved in providing and organizing the event.

You can select a suitable limit per person depending on the per capita expenditure. There is an overall limit according to the number of invitees, and this is in addition to the Limit of Indemnity.

The maximum cover normally available under this extension is 25% of the Budgeted Expenditure for the event.

An aggregate excess applies depending on the size of the event.

Invitees Extended Stay Protection

Extended stays paid for by individual invitees or delegates are a common feature of incentive and conference events. If the principal agrees to provide an indemnity to such persons, then their interest can be included as an additional item provided all such persons are covered - selection is not available.

You can specify a limit per person ( which should ideally be based upon the maximum exposure for any one person ) and the total number of persons on extended stays, and this is then included as an addition to the Limit of Indemnity.

Enforced reduced Attendance

This occurs when a single cause prevents a substantial number of delegates or visitors (as distinct from invitees who are covered under the Standard Cover) from attending the event, thereby reducing attendance. It is necessary to show that such a reduction is abnormal , and the amount claimed is for the abnormal part of the reduced attendance.

Where adverse Weather is covered it is generally the case that underwriters will not quote less than 14 days prior to the event. This is to elimintate selection against the insurer.

Where there is an exhibition, the cancellation of the Event can give rise to additional losses which are covered as follows:

Return of Fees etc.

This covers the justified return of fees or contracted charges for attendance, space, advertising, fees for television, radio or other advertising media or sponsorship.

Loss of Net Profit

This covers the substantiated loss of Net Income or Net Profit which the Insured can show would have been earned by the Insured had the event not been affected by an insured peril.

Protective Action Costs

These are the costs in an attempt the protect and maintain the standard which the event has clearly established in immediately prior years. It is aimed at minimizing the adverse effect of a loss upon the next event. The maximum payable under this clause is 20% of the Limit of Indemnity.

All Risks Extension : Property at Event and Damage to Venue

This extension covers the Property Insured against “all risks of physical loss or damage”; occurring during the event. Cover is available under two headings:

1. Own Property etc.

All property belonging to the Insured or for which they are directly responsible whilst at the event or whilst in direct transit to or from the insured event up to $ are available for higher sums insured. Special considerations apply to mobile telephones , computers and similar high risk equipment :

2. Damage to the Venue

Buildings, machinery, plant, fixtures and fittings being the property provided to the Insured by the property owners or management of the venue for the purposes of the insured event. The standard sum insured under this item is$ any one loss.