5 music festival insurance considerations

The modern-day music festival is a complex, entertainment extravaganza of elaborate stage productions and coordinated multi-day sets with numerous performers at exotic locations across the globe. Music festivals are no longer solely about the music, but a wide variety of neighboring entertainment such as art shows, athletic competitions, health and beauty demonstrations, virtual reality and stand-alone night clubs.

From a risk management perspective, festivals now run the gamut on potential liabilities that include collapsed stages, canceled performances, severe weather, terrorism, alcohol liability, patron bodily harm and death, product liability and breach of contract claims. In essence, music festivals have become a microcosm of live entertainment-related liability exposures.

To combat these potential liabilities, festival owners, promoters, coordinators and those even tangentially involved in the music festival business are purchasing a variety of insurance policies. These types of insurance policies often include cancellation insurance, terrorism, general liability, directors and officers, workers’ compensation, spectator liability coverage, umbrella policies, commercial automobile and crime coverage. Individuals in the music festival business should take note of the following considerations, both when purchasing any of these policies and in their pursuit of coverage.

Related: 6 tips for staying safe during summer festivals

1. Work with an experienced broker that understands your business and potential liabilities.

Most insurance policies are purchased through insurance brokers that negotiate coverage and rates with the insurers on behalf of their insureds. The insurance broker’s task is to canvas the marketplace and then provide the insured with information regarding which insurers provide the requested coverage, the premium rates that the insurers charge for the requested coverage, how the terms and exclusions of the insurers’ policies compare with one another, whether they could procure the requested coverage and, if so, whether there are any gaps.

Brokers also often provide their recommendation regarding which policy is best. Since music festivals are complex businesses with many potential liabilities, it is important that the broker understands the scope and types of risks, appreciates what kind of insurance would cover those risks, and is familiar with the insurance marketplace and the policies available in the insurance market.

2. Know who is an ‘insured’ under your insurance policies.

An “insured” is a person or entity that the insurer agrees to indemnify (and in liability policies, defend or pay the costs of defense against claims and/or suits) pursuant to the terms of the insurer’s policy. Commonly, two types of insureds are identified in policies: named insureds and insureds. When a corporate entity is the named insured, the policy may not clearly state whether subsidiaries and other affiliated corporate entities, as well as their employers, are insureds.

Insureds and their brokers should be careful during the underwriting process to ensure that the identity of all covered entities is unambiguous and readily ascertainable from the insurance policies. This is especially important in the music festival business where alter egos, portfolio companies and subsidiary/parent corporate entities are involved in different aspects of the funding and management of the music festival but often aren’t recognized as insureds.

Related: The risky business behind live events

3. Understand the terms of your policy and know what is excluded.

Virtually all policies contain certain basic parts:

• the definitions;
• the insuring agreement;
• the conditions;
• the exclusions; and
• the endorsements.

Before there is an insurance claim to make, an insured should read and understand these parts so that the insured knows what is and is not covered under the policy. As noted above, insureds in the music festival business purchase a variety of insurance policies that cover different risks. However, almost all corporate insureds will purchase a commercial general liability (CGL) policy. A CGL policy is designed to provide the broadest coverage available to insureds for bodily injury, property damage, personal injury and advertising injury. CGL policies also exclude certain risks that are especially important to those in the music festival business.

These exclusions include the following: the assault and battery exclusion; the liquor liability exclusion; expected or intended exclusion; and the participants in athletic or entertainment events exclusion. An insured in the music festival business should review these exclusions and understand their potential limitations on coverage.

4. Examine all policies for potential coverage.

Coverage for claims and suits may be found in more than one insurance policy or even within the coverages of a single policy. For example, a lawsuit may involve a claim for bodily injury and property damage (both typically covered under a general liability policy). When making a claim for coverage, insureds should carefully review all policy terms and conditions to maximize potential coverage and insureds should never make any assumptions about what is covered under their policies. Accordingly, it is important that insureds in the music festival business examine all possible avenues of coverage and consult an insurance specialist or attorney if coverage is unclear.

Related: Live event insurers must adapt to evolving threats

5. Making a coverage claim.

Following a loss, an insured should pay close attention to all timing-related policy terms. Typically, insureds have a stated amount of time to perform certain tasks under policies, such as providing notice, filing a proof of loss or filing suit against the insurer. For example, many policies require the insured to submit a notice of a loss as soon as practicable or within a specific number of days. Failure to comply with these notice requirements can negatively impact coverage. Thus, insureds should make every effort to provide formal notice within the stated time.

First-party policies, such as event cancellation policies, will likely also require insurers to provide a detailed proof of loss within a specific time frame. The proof of loss is the documentation and description of the nature of the loss and extent of losses suffered. Insurers should gather copies of all canceled checks, relevant contracts and invoices and receipts pertaining to amounts paid in connection with the planning and organizing of the canceled or postponed event.

Insureds should also be aware of any timing-related limitations on when to file suit against an insurer. In some cases, the timeframe is dictated by the insurance policy and in others, a statute or regulation will provide the applicable time period.

Related: 5 ways to make festival-style concerts safe and enjoyable

Mikaela Whitman is a partner in Pasich LLP’s New York office and a member of the firm’s insurance recovery practice. This article first appeared on Law.com, a sister publication of PropertyCasualty360.