Legal giant Herbert Smith Freehills is urging businesses to check the inclusion of communicable diseases is in their event cancellation insurance policy
Recouping losses associated with cancelling an event could be tougher than expected for businesses that haven’t checked their event cancellation insurance policy, according to an international law firm.
Legal giant Herbert Smith Freehills (HSF) released a blog post today (4 February) warning companies with event cancellation coverage to review their policies and ensure they don’t exclude “communicable diseases”.
In instances where policies do have such an exclusion, and insureds haven’t sought additional coverage, the firm believes claiming back lost revenue could be a challenge.
The blog post said: “It is generally rare for a business to be able to insure against business losses that are not consequent on some form of physical damage.
“However, businesses do frequently take out event cancellation insurance. This is likely in general terms to cover the necessary cancellation, postponement or curtailment of the event for external matters out of an insured’s control.
“However there will be various exclusions or limitations, including, potentially, for communicable disease, unless this is added back by way of additional cover.
“In all events, it will be necessary to look very carefully at the wording – the scope of the wording, and the scope and status of any governmental guidance, advisories or prohibitions may all be relevant to how the policy applies.”
Several events have now been cancelled due to fears surrounding coronavirus, the latest major examples being Google’s Cloud Next and I/O 2020 conventions.
Events cancelled due to coronavirus may not be covered even if they do include a communicable disease trigger
According to HSF, in some cases, even coverage that does extend to communicable diseases as a reason for cancellation may run into problems in the event of a claim — with approval or denial based on the interpretation of policy wording.
In its blog post, the firm said: “Whilst some contracts will deal with the situation expressly, others might contain an implied allocation of risk.
“This may require consideration of whether a ‘force majeure’ or contractual frustration clause is applicable, which will involve interpretation with regard to the context and objective purpose of the clause.
“There may also be issues over whether any particular categories of losses are recoverable, or whether some are too remote.”
As an additional concern, HSF said that in instances in which businesses choose to change the format of an event so that it’s web-based, this alteration presents a new set of risks and organisers should ensure their original policy covers the new potential liabilities.