Cardboard Cutouts And Pandemic Exclusions—amidst COVID-19, The Market Is Adjusting And Carefully Reviewing Event Cancellation Policies In The Sports Industry.
The Los Angeles Rams’ SoFi Stadium may be up and running—hosting NFL games in the new 3.1 million-square-foot home with up to 100,000 seats—but fans are nowhere in sight with local orders still in place prohibiting large gatherings.1 The first game took place on September 13, 2020, amidst cardboard cutouts that fans could buy to be “in the stands.” 20% of season ticket holders have asked for refunds, while the rest have opted to roll their tickets into the next season.2
Sporting events generate significant revenue, from tickets to advertising and sports memorabilia. The Rams admit “the pandemic will have a major short-term impact on the team’s bottom line as revenue streams from everything from concessions to parking disappear.”3 Most sports institutions buy event cancellation insurance to protect the potential revenue from catastrophic events such as wildfires, power outages, or disease outbreaks. With COVID-19 still going strong and expected to continue at least through the beginning of the next year, many sports institutions are anxious to protect their players and find ways to mitigate losses. Even after postponing games or playing to empty stadiums, many sports institutions are still scrambling to generate revenue. The 2020 Olympics are an extreme example of potential increased costs, as it may cost upwards of $650 million to postpone the Games to 2021.4
Event cancellation policies are intended to insure against unexpected loss resulting from cancellation, abandonment, interruption, or postponement of the event. Event cancellation policies cover events ranging from conferences to live music events to sports games. The loss must be an “occurrence” beyond the control of the insured; past examples of such occurrences include the dome collapse at the Minnesota Vikings’ Metrodome5 and wildfires near a Raiders-Chargers game.6
Coverage ultimately depends upon the terms and conditions negotiated for the particular policy. Past outbreaks such as Legionnaires’ disease and the 2003 SARS outbreak have led the majority of insurance companies to exclude pandemics or provide only limited coverage. However, there may be coverage if an insured purchased an insurance endorsement or rider to add coverage for communicable disease to their policy. Event cancellation insurance typically provides:
A. EVENT CANCELLATION
We will indemnify you, up to the Limit of Insurance, for your loss as a direct result of cancellation, abandonment, curtailment, postponement, or relocation of the insured event to which this...
