You've nailed down the venue, secured the hotel rooms, booked the speakers, and signed the contracts. But as we learned so graphically on September 11, some things are beyond even the best planner's control.

What if the show can't go on? The consequences — particularly for a corporation staking big bucks on a marketing event or for an association that gains most of its revenue from an annual conference — can be dire. One safety net is event cancellation insurance, which can protect your event investment against snowstorms, strikes, earthquakes, and other catastrophes.

Known as “business interruption insurance” in other industries, cancellation policies are valuable even when an event isn't a complete wash. Paulette Norman, assistant vice president of insurance company Seabury & Smith, Park Ridge, Ill., says it's important to keep in mind that claims can be filed for expenditures due to unforeseen circumstances. For example, she says, a group meeting in Dallas during a heat wave was worried that attendees wouldn't want to make the open-air walk from their hotels to the convention center. Its policy covered the cost of air-conditioned busses to ferry attendees back and forth.

Whether planners should invest in cancellation insurance depends upon how important an event is to an association or corporation financially and what kind of risk it is assuming. “If you're holding a board of directors meeting for 65 people that wouldn't generate income and was inexpensive to hold, there's no point,” explains James M. Goldberg, an attorney with Washington, D.C. — based Goldberg & Associates, PLLC. “But if it's a big annual event for 3,000 people that's a major source of revenue, definitely think about insuring.”

Attorney John Foster of Foster, Jensen & Gulley, LLC, Atlanta, recommends doing a risk-benefit analysis, looking at what you could lose versus the cost of the insurance. “If you have $100,000 in potential revenue/loss, and the insurance is $1,000, it's worth it,” he says.

“It's a calculation,” agrees Jonathan T. Howe of the Chicago-based law firm of Howe & Hutton Ltd. “If you're holding an event for 12 people, it's probably not worth it. But if the event is for 1,200 — definitely.”

Planners can't rely on a venue's liability coverage. Howe notes that if a convention center burns down, the venue's policy will help the owner construct another building — but it won't help a displaced conference find another meeting site. Likewise, a liability policy would cover the group if someone were injured at the meeting, Goldberg says, but wouldn't help a canceled event recoup lost profits and expenses.

Julie Steible, CMP, CMM, events manager of NCR Corp., Dayton, Ohio, has never purchased cancellation insurance. The company did price it for a recent event in Dubai because of the troubles in the Middle East, but ultimately decided it was cost prohibitive. “We decided to take the risk, and all worked out well.”

Barbara Dunlavey, CMP, vice president of conferences for the Arlington, Va. — based Information Technology Association of America, says she always purchases the insurance for conferences with programs of $100,000 or more in revenue and expenses at stake. While Dunlavey has never had to file a claim on behalf of the ITAA, she did have to file once when she worked in another industry for a meeting where the major speaker — and main draw — canceled. “The entire meeting imploded,” she says. “You don't plan for the negative or the bad to happen, but that's part of planning for success.”

Coverage and Cost

The basic rule of thumb is that cancellation insurance covers perils that are beyond the control of a planner, such as inclement weather, a principal speaker dropping out, strikes, outbreaks of disease, and so on.

What the insurance won't cover is poor planning. You can't buy a policy to cover meetings scrapped because a company went bankrupt or losses due to low attendance because of a lack of interest or poor marketing. “Why would insurance companies take these losses?” asks Foster. “If there was insurance for bad business decisions, insurance companies would go broke.”

The cost of a policy depends on variables such as where and when the meeting is scheduled and the budget. The standard cost is about 45 cents per $100 of exposure, according to Michelle Holmes, vice president of Washington, D.C. — based Rust Insurance, noting that in earthquake, hurricane, or severe winter weather areas, the cost would go up to about 65 cents per $100 of exposure.

Because it is a smaller, more specialized market, cancellation insurance isn't standardized, as term life insurance is, and it is written on a policy-by-policy basis, says Goldberg, who estimates that about half his meeting clients purchase insurance. Policies can cover multiple meetings or just one event.

Lou Novick, president of Rockville, Md. — based Novick Insurance, notes that since the market is so narrow, it pays to consider all the players.

The American Society of Association Executives endorses one of the three main competitors in the cancellation insurance field, the Showstoppers Association Event Cancellation Insurance policy administered by Aon Association Services and underwritten by Gulf Insurance Group. Other policies include Rust Insurance's Event Savers, underwritten by Lloyd's Binding Authority, and Seabury & Smith's ExpoplusCCI. (See sidebar for contact information.)

When to Buy

The earlier in your planning that you purchase cancellation insurance, the sooner it can start working for you. Eileen Hoffman, program manager of Aon Association Services, Washington, D.C., says coverage begins as soon as premiums are paid and extends to five days after the event, to cover things such as extra expenses if hired trucks or moving people don't show to break down exhibits. The insurance can be purchased up to one month before an event begins or as far out as three years in advance. Coverage can be vital pre-event if something happens to the facility at which your event is booked, she notes, explaining that the policy would cover costs incurred to relocate.

Novick remembers one group with a conference planned at the Fontainebleu in Miami not long after Hurricane Andrew. The group was able to file a claim to cover $100,000 in expenses for moving events to other hotels in the area, and another $10,000 to inform attendees of the changes.

Insurance is also usually less expensive if purchased far in advance, adds Foster. Insurers increase the price, theorizing that the closer the event is, the more desperate a group must be for coverage.

The Bottom Line

Above all, everyone interviewed agreed that planners should, at the very least, consider a cancellation policy if their event is of fiscal importance to the organization — even though, as Novick notes, less than 1 percent of those who take out policies file claims.

“You're going to see an even greater trend toward this kind of coverage thanks to the volatile nature of the financial market,” Holmes predicts. “People are less willing to take the loss upon themselves.”

Mark R. McCulley, CMP, of Mark of Excellence Meetings and Events in Los Angeles, notes that despite his advice to the contrary, most of the small association clients he's worked with don't bother with the insurance. “They don't see the element of risk the same way I do,” he says. “I worry about it, but ultimately it's their choice. … Anybody holding a meeting of substance should consider it.”

For More Information

Showstoppers Association
Event Cancellation Insurance
Aon Association Services
www.asae-aon.com
(800) 424-8830, ext. 333
contact: Eileen Hoffman

ExpoplusCCI
Seabury & Smith
www.expoplus.net
(800) 323-2106, ext. 34271
contact: Paulette Norman

Event Savers
Rust Insurance Agency Inc.
www.rustinsurance.com
(800) 235-1889
contact: Michelle Holmes or Laura Johnson