Hope for the Best, Plan for the Worst

Feb. 1, 2002 Beth Negus Viveiros | MEETINGSNET

You've nailed down the venue, secured the hotel rooms, booked the speakers, and signed the contracts. But some things are beyond even the best religious meeting planner's control. What if — because of airline strikes, earthquakes, or “acts of God” — the event can't go on?

The consequences for religious organizations can be dire. Event cancellation insurance, known as “business interruption insurance” in other industries, can be a safety net — even when the entire event isn't a wash.

Paulette Norman, assistant vice president of insurance company Seabury & Smith, says religious meeting planners should keep in mind that claims can be filed for all kinds of unanticipated expenditures. For example, a meeting in Dallas during a heat wave was at risk because attendees didn't want to walk outside their hotels to the convention center. That policy paid for air-conditioned buses to ferry attendees back and forth.

But is it always a good idea? “If you're holding a board of directors meeting for 65 people that … 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, think about insuring, he says.

Attorney John Foster of Foster, Jensen & Gulley, LLC, Atlanta, recommends doing a risk/benefit analysis to look 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.

Lou Novick, president of Rockville, Md.-based Novick Insurance, says he has dealt with some meeting planners who, after disasters, saw the value of purchasing meeting insurance. One was a group that had a function scheduled at the Javits Center in New York. It lost a third of its attendees, thanks to a government shutdown that froze spending.

Another group was luckier — it had a conference in California the week before the area was struck by an earthquake. “A close call like that makes you think,” Novick says.

Ed Armstrong, vice president, insurance, retention, and financial-related programs for ASAE Services Inc., a subsidiary of the American Society of Association Executives, notes that only about 30 percent of 12,000 associations that ASAE represents purchase cancellation insurance.

The Options

There are 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; Rust Insurance's Event Savers, underwritten by Lloyd's Binding Authority; and Seabury & Smith's Expoplus CCI. (See sidebar, page 28.)

“You're going to see a greater trend toward this kind of coverage due to the volatile nature of the financial market,” predicts Michelle Holmes, vice president of Washington, D.C.-based Rust Insurance.

Several variables, such as where the meeting is being held, the event's budget, and the time of year, will determine the minimum cost, which can range from $500 to $140,000, according to Eileen Hoffman, program manager of Aon Insurance Services, Washington, D.C.

The standard range of cost is generally 45 cents per $100 of exposure, explains Rust Insurance's Holmes, 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, explains Goldberg, who says about half of his meeting clients purchase the policies. Policies can cover multiple meetings or just one event.

The basic rule of thumb is that cancellation insurance covers perils that are beyond a religious meeting planner's control, such as inclement weather, a principal speaker dropping out, municipal strikes, or outbreaks of disease. Definitely think about it when planning events in hurricane- and earthquake-prone regions and high-snowfall areas. What the insurance won't cover is poor planning, meetings canceled because a company went bankrupt, or low attendance because of lack of interest. “If there was insurance for bad business decisions, insurance companies would go broke,” says Foster.

When to Buy

Hoffman 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 up to break down exhibits. It can be purchased as close to one month prior to an event — or as far out as three years. Coverage can be vital pre-event if something happens to the facility at which your event is booked, she notes, explaining the policy would cover costs to relocate the event.

Insurance is usually less expensive if purchased far in advance, adds Foster. The insurance provider's rationale is the closer the event, the more desperate a group must be for coverage.

Last year's power outages and blackouts in California illustrate why it pays to think ahead. Rust's Holmes notes that people who purchased policies before the crisis started have coverage, but now it's considered a pre-existing condition and wouldn't be covered. AON's Hoffman indicated she thought it would be covered under Showstoppers, but Norman agrees with Holmes that it qualifies as a pre-existing condition.

Planners can't rely on a venue's liability coverage to help them in case of calamity. 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, meeting planners' liability coverage won't help much when a meeting is canceled. It would cover the group if someone were injured at the meeting, says Goldberg, but it wouldn't help recoup the lost profits and expenses incurred because of a canceled event.

The Bottom Line

Above all, planners should, at the very least, consider buying a cancellation policy if their event is fiscally important — even though, as Novick notes, fewer than 1 percent of those who take policies file claims.

Mark R. McCulley, CMP, Mark of Excellence Meetings and Events, Los Angeles, notes that despite his advice, most small organizations he has 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.”