The opportunity insurers are missing as COVID-19 cancels events

As large sporting and entertainment events get cancelled across Canada and the world as a result of COVID-19, the insurance implications affect not only event organizers themselves, but also promotional partners, licensees and businesses involved in merchandising.

While event organizers may have contingency cover for the pandemic, insurance would not necessarily be in place for licence agreements for third parties working and earning from that event, Jade Giltrap, media team leader with specialist insurer CFC Underwriting, told Canadian Underwriter in an interview Thursday.

And those that do buy coverage would likely purchase a general professional indemnity coverage, which could leave them with gaps in coverage.

The licensing industry includes things like the licensing of images, logos, graphics and trademarks, for example. “Effectively, it’s brands that partner with other brands, or businesses that partner with other businesses to use intellectual property that somebody else owns, either to monetize a product or enhance a brand,” Giltrap explained, referring to things like sponsorship and endorsement deals, licensing collaborations, and naming rights for stadiums.

“Tons of businesses would have been unable to sell content or sell product in line with an event that is no longer going to be happening,” she said.

D.C. United forward Wayne Rooney (9) brings the ball down as Toronto FC midfielder Michael Bradley (4) looks on during first half MLS playoff soccer action in Toronto on Saturday, Oct. 19, 2019. The season suspended because of COVID-19, Major League Soccer has extended its team training moratorium through April 3. THE CANADIAN PRESS/Frank Gunn

Coronavirus has halted the Tokyo Olympics, the Wimbledon Championships, Formula One Grand Prix races, and has also resulted in the suspension of Major League Soccer in Toronto, Montreal and Vancouver, to name just a few events affected. “Any of the deals that would have aligned with those can no longer be fulfilled.”

From an insurance standpoint, a lot of clients may not have purchased coverage for license agreement liability. The contracts are quite individual and there is no universal language within the contract, Giltrap noted.

And even if a media, tech company or life sciences client, for example, does buy cover, they’re likely to purchase a general professional liability policy.

“But where they are a manufacturer or they are a provider of some other products — for example, perhaps they are selling T-shirts for a sporting event — those clients are not ordinarily likely to buy professional indemnity or errors and omissions insurance,” Giltrap said. “So, they’re likely to not have any cover at all.”

CFC offers a customizable license agreement liability product that provides protection to licensees for unintentional breach of their licence agreements, including cover for intellectual property infringement. Licensees purchase insurance to cover breach of contract with the licensor and to provide coverage for broader intellectual property relating to image, logos or graphics under the contract, for example.

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“But I would imagine there’s not many of these clients that have insurance in the first instance,” Giltrap said. “If they do, I don’t think there would be an exclusion necessarily around COVID-19 if they are buying professional indemnity for example. It’s going to be quite interesting to see how the industry responds to this.”

There’s definitely never been more of an appetite for content across the world, now that the pandemic is here, she said. “Not only can the event not go ahead, but some [effort] would have gone into creating content for those events.” For example, a transportation company working with a third-party brand to put a logo or graphic on the side of a truck, or a pharmaceutical company working with Disney to put an image on the side of a vitamin package for children.

“The insurance industry has realized this opportunity, or that this industry exists, and the underlying contracts there almost require insurance,” Giltrap said. “And the insurance they require will be a breach of that licensing agreement. I think the industry as a whole will be looking at its exposures to those contracts.”