August 22, 2013 by Regan Reid
Summer is the season of special events—golf tournaments, charity bike races, picnics and staff parties. Like any host, the companies planning these special events want to ensure their guests have a good time. But in the excitement of planning the perfect party, the many risks these one-off events can pose are often overlooked. It’s only natural. Your clients are good at their core business but they probably don’t have a lot of experience organizing events.
“There are lots of different things that can go wrong,” says Rob Jordan, vice-president, sports and leisure program manager, at Everest Insurance Company of Canada. Off the top of his head, Jordan can think of a number of risks event organizers face. At charity bike rides, cyclists could collide and get injured. At events with outdoor tents, people can trip over the tents’ tie-downs and break an arm or a leg. Those tents can tear in windstorms, too—or even fly away. And at family-friendly events, kids can even get injured in the bouncy castles. “The number of people that get injured in these inflatables is pretty significant,” says Jordan. Though insurance may not be top of mind for your party-throwing clients, summer corporate events give brokers an opportunity to offer them important risk management advice and unique coverages for every event.
We’re starting to see certain venues require a higher limit, whether it’s 3, 4, 5 , all the way up to $10 million.”
Event Planning 101
For clients that are new to hosting events, there are a few pieces of key advice that brokers should offer right off the bat. First and foremost, companies should look to their commercial general liability (CGL) policy to see what is and isn’t covered, says Jeff Somerville, president and commercial general liability practice leader, at SUM Insurance. Depending on the size and scope of the event, most companies’ CGL policy will provide sufficient coverage for events, he says. Though Somerville says that a general liability policy covers “most stuff,” it may also have exclusions that clients could easily fail to notice. If your client is planning on having a fireworks display, for example, they need to be aware of any pyrotechnic exclusions and purchase additional insurance if necessary, he says. “Your broker, of course, is the place to go for that advice.”
There are many reasons why a client would consider purchasing additional special event liability coverage. Some companies may want to protect their general liability policy from claims that could arise from the event. “We do actually see quite a few organizations and companies coming to us even though they do have their own [general liability] policy in place. They look to have another primary policy so if there were an incident, then it wouldn’t be stuck on their current policy for years to come,” says Matthew Taylor, general manager of operations for Canada at PAL Insurance Brokers.
Another reason for purchasing a special event policy, says Taylor, is that the demand for liability coverage is increasing across Canada. Most community centres and public spaces used for hosting events have traditionally required general liability coverage with limits of $2 million, but Taylor says that minimum requirement is starting to increase. “We’re starting to see certain venues require a higher limit, whether it’s $3, $4, $5 [million], all the way up to $10 million.” It’s up to the client to be aware of these minimum requirements, says Taylor, and purchase the appropriate coverage. “We do see, quite a few times [that] companies will come in and buy a $1 million limit when the venue has a requirement that they have to have $2 million or $5 million,” he says.
Clients should also ensure that the people they hire—bartenders, caterers, security, etc.—are all insured. “One of the key risk management techniques, obviously, is to go out there and make sure that every one of these suppliers that you contract with to hold your event…is insured and adding use of additional [insurance],” says Somerville. If anything goes wrong, “your organization, unless you’ve taken the measures to get proof of insurance from those contractors, could be held liable,” adds Everest’s Jordan.
Jordan also recommends that, no matter the size of the event, it’s important to have experienced organizers and professionals on hand. “There are so many different things to consider and being organized and prepared is important. That can go to having first aid on site to making sure that, if it’s an outdoor event and it could be affected by … adverse weather, that they know when they should be canceling an event and making sure people get to safety as needed,” he says. “The more prepared they are with experienced people, the better that they can mitigate their risk and their liability.” Jordan gives the example of the bouncy castle, which many hosts often overlook as a risk. But if the event organizers don’t have trained individuals monitoring the castle—how many kids go in, how old the kids are, etc.—the castle could deflate with children inside, he says. “If you have adults manning these bouncy castles and they’re trained by the rental companies as to how they should [operate]…then they can reduce their liability.”
What Are the Odds?
One of the most popular summer events is the golf tournament—and for companies that are trying to create some buzz around their event, one of the most popular prize giveaways is the Hole-In-One contest. All things considered, Hole-In-One coverage is fairly straightforward, says Thomas Butler, vice-president and general manager of K&K insurance. A company will purchase a policy for the amount of the prize and, if a lucky golfer sinks a hole-in-one, the policy pays out the award. But what if there are two, or even three, extremely lucky golfers at this event? “Technically, on hole-in-ones, once a person makes [the shot], it’s over. So unless [the host] buys repeat insurance, then they’re on their own if they want to continue it,” says Butler. The likelihood of more than one person sinking a hole-in-one is fairly remote, he says, but it has happened. “You have to read the policies. Make sure that you’re well aware, well informed, and that the person that’s selling the hole-in-one understands it.”
Butler knows a thing or two about hole-in-one prizes. In 1998, he was that lucky golfer that made that near impossible shot. Fifteen years ago, the odds of someone sinking a hole-in-one was 11,000 to one. Great odds for the insurance company collecting the premium. “Now it’s down to about 7,000 to one. That’s the Tiger Woods effect,” says Butler. “Golf took off and everybody got involved with it and now all of a sudden there are people that are highly more involved than they used to be.” The result: more people sinking shots and more claims being paid out.
In addition to prizes, companies are also called upon to sponsor events, such as bike races, marathons and other competitions. As the Boston Marathon bombings highlight, one increasingly important coverage is sponsorship liability. “There were all kinds of major corporations that had their banners hanging everywhere as the bombs were going off,” says Butler. If something goes wrong at an event and the event is sued, major sponsors can also be drawn into the lawsuit. To protect against this risk, many companies are now purchasing separate policies that cover them for all the sponsorship they do as an organization, says Butler.
“There were all kinds of major corporations that had their banners hanging everywhere as the bombs were going off.”
Whether it’s a company barbeque, networking event, or corporate celebration, if there is alcohol involved, the host’s liability automatically increases. However, a company’s CGL should offer some protection. “If a business has proper insurance in place, i.e. commercial general liability policy, and if that policy doesn’t have any unusual exclusions, then it would provide some coverage for events that might take place… as part of their business,” says Theresa Texeira, executive vice-president, chief underwriting officer, of Totten Insurance Group. However, if the host company is selling liquor at an event their, CGL would not offer coverage. “If they were going to make money on this venture, then they absolutely need to buy a host liability policy,” says Texeira. “The language of the policy is quite clear on that.”
There are many reasons why companies may decide to purchase additional liquor liability coverage. Firstly, when alcohol is involved anything could go wrong. Someone could leave the bar intoxicated and get injured—or worse, injure someone else. And what many event hosts don’t realize, says K&K’s Butler, is that even if a bar or event hall is in charge of serving the alcohol, if the host company is paying for it, they are held dually responsible. “If you look at the [court] awards that have been associated with this, they’ve been quite large. You may not want to expose your CGL carrier for your business to that potential,” says Texeira. A CGL policy may also not be adequate to cover these legal expenses, she adds. Another area of concern is forcible ejection. “You see this person as drunk and disorderly so you show them the door. There is a fairly big onus of responsibility in that regard as well,” says Texeira. What is more, if the event is held in a rural area (as many golf tournaments are) there’s a higher onus of responsibility. “You should expect that [the guest] is going to get into a car. That’s something that your average insured should know so that they make sure they have adequate limits to take care of that,” says Texeira. Though it’s difficult to say what an appropriate limit is, Texeira recommends at least $5 million. “The court awards are moving more dramatically to those larger limits,” she says. “One only has to look at situations [where] they happen to hit a car that has more than one passenger in it. It’s not going to be hard to reach those limits.”
There are many risk management strategies that brokers can recommend to their clients, however, to limit their exposure. If the host company is in charge of hiring bartenders and servers, for example, they should make sure they’ve had the proper responsible alcohol beverage service training (such as Smart Serve in Ontario), says Texeira. Security needs to be trained to deal with people who need to be removed from the event and taxis or other forms of transportation should be in place. “Doing simple things like encouraging car pools is always very, very helpful,” says Texeira. “If you look at the court awards, where they’ve done these actions, they’ve basically been relieved of liability because they took all appropriate actions to avoid losses.”
Expecting the Unexpected
Every event is different. What goes smoothly at one event may end disastrously at another. The important thing is to ensure clients are prepared for any risk. “My advice is expect the [unexpected], which is the whole purpose of insurance,” says Somerville. He recalls one particularly stressful special event that SUM insured, World Youth Day in Toronto in 2002. Thousands of people showed up for the event at Downsview Park and, because it was raining, they were given disposable rain ponchos. Inevitably, some of these ponchos ended up in the port-o-potties, which ultimately caused a sewer back-up in some retail stores in the area. The end result was one expensive claim. “Never in a hundred years would we have predicted that that would be the cause of loss. But there you go,” says Somerville. “You can’t plan for the truly [unexpected], but you can expect it. And you can look to transfer the risk with adequate insurance and adequate limits.”
Copyright 2013 Rogers Publishing Ltd. This article first appeared in the June 2013 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.