What Is Event Cancellation Insurance?
Event cancellation insurance (ECI) is a type of coverage that individuals and businesses may purchase to reimburse the costs of an event that is canceled. Like other types of insurance, whether the insurance company will pay depends on whether the event and cause of cancellation fall within the terms of the policy.
ECI is one of several types of coverage that may help lessen the burden of an event the does not go forward. If you have had to cancel an event due to unforeseen circumstances, talk to a business interruption attorney to get a personalized policy review of your available insurance coverage.
What events can be covered by event cancelation insurance?
ECI may cover any type of large event. This includes personal one-time events like weddings and annual business events like conventions and music festivals. It may also cover sports events, from amateur tournaments to professional games.
Depending on the wording of the policy, coverage may apply when a covered event is canceled, moved, postponed, or in some other way interrupted due to specified events outside the policyholder’s control. When the coverage applies, it pays for the policyholder’s event-related expenses and lost revenue.
What types of cancelations are covered by ECI?
As is usually the case with insurance policies, whether a cancelation is covered by an event cancelation policy depends on the wording of the policy.
Policies may list specific covered causes or be termed “all-cause” or “all-risk.” All-cause policies do not truly cover all-causes, but any cause that is not specifically excluded by the policy.
Perils that are often covered by ECI, either explicitly or under an all-risk policy, include:
- Natural disasters like earthquakes, fire, or flood
- Extreme weather, including tornados, hurricanes, and snowstorms
- Terrorist acts
- Labor disputes that do not involve the policyholder’s employees
- Non-appearance of performers, guest speakers, or other featured individuals
The common thread is that the event cancelation is beyond the control of the policyholder.
Are cancelations due to communicable diseases like Covid-19 covered?
Some policies may include coverage for communicable diseases, and some may even specifically cover pandemics. If you have this coverage is more likely to be included if you secured your policy before 2020. Many insurance companies changed their policies in 2020 to exclude coronavirus-related cancelations from coverage. Some also stopped offering additional coverage for infectious diseases. This is similar to what happened in the industry after the outbreak of severe acute respiratory syndrome (SARS) in the early 2000s.
Specific risk policies, which only provide coverage for listed causes, may include communicable diseases. When it comes to all-risk policies, pandemic-related cancelations may be covered unless they are specifically excluded. However, some policies specifically exclude them. Where the policy extends coverage, it will not be triggered due merely to the threat of a communicable disease; the event cancelation must occur because of an actual outbreak.
Many COVID-19-related event cancelations were due to civil authority orders requiring people to remain at home unless engaged in essential activities and restricting gatherings to 10 people or fewer. The circumstances and wordings of the order may play a role in whether a cancelation is covered under an ECI policy and whether it would have been possible for the policyholder to minimize their losses.
How ECI differs from business interruption insurance
People and businesses looking to recoup losses for a canceled event may be covered by either or both ECI and business interruption insurance. These coverages may sound similar on the surface, but some crucial differences reside in the details.
Business interruption insurance policies typically require an interruption caused by direct physical damage. There have been some court rulings holding that effects of a viral pandemic, such as a shutdown by a governmental authority, or the need to sanitize, equate to a direct physical loss. However, this is not a requirement in ECI policies.
As always, your likelihood of succeeding on an insurance claim depends on the wording of the policies at play and the specifics of your situation. It is important to speak with a New York City business interruption insurance attorney to obtain a personalized analysis.
Speak with a New York lawyer about your event cancelation
If your event was canceled due to circumstances outside your control, find out what your insurance recovery options are by speaking with an experienced attorney at Douglas & London. Our team will take a personalized approach to help you find a solution to the expense and lost revenue of your canceled, interrupted, or postponed event. Call today to schedule a confidential consultation.