By Lorelie S. Masters, Michael S. Levine, and Tae Andrews
Recent catastrophic weather events and trends stress the importance of carrying event-cancellation insurance for professional sports organizations and stadium owners. Event-cancellation insurance protects policyholders from risks associated with event cancellations due to inclement weather, performers failing to appear as scheduled, and other unforeseeable events. Hurricane Irma forced the Miami Dolphins and Tampa Bay Buccaneers to re-schedule their game for later in the season, just days after Hurricane Harvey dumped an unprecedented amount of torrential rainfall on the Houston area, causing the Houston Astros to relocate to Tampa Bay. Weather patterns that have only continued to intensify in recent years place a premium on nailing down event-cancellation insurance—before the storms arrive.
Professional sports games held in NFL teams’ stadiums
The most high-profile example of this came in 2005, when Hurricane Katrina damaged the Louisiana Superdome, the home of the New Orleans Saints. The fallout from the storm forced the Saints to take their act on the road and play their eight scheduled “home” games in other cities.
Several high-profile hurricanes have caused tremendous amounts of damage in the Southeast in recent years, but teams in the northern parts of the country have also suffered from bad weather. In 2010, the Minnesota Vikings had to relocate two of their home games after a storm dumped snow on their stadium, causing the roof to collapse. The Vikings could not catch a break with the weather that year—another snowstorm in Philadelphia forced Minnesota and the Eagles to move their Sunday Night Football game to Tuesday evening. In 2014, the New York Jets and Buffalo Bills also had to play one of their games in Detroit after a severe snowstorm blanketed the Buffalo area in more than four feet of snow.
Home games mean valuable ticket, concessions, and merchandise revenue for the hosting teams. This is especially true in the NFL, where each team only has eight home games. In recent years, the League has begun to place an added emphasis on scheduling games overseas, meaning that some teams only get seven home games in any given season. Bad weather can cause massive losses—even if the game ends up being postponed, and not cancelled outright. Fans often travel great distances to attend games (both in-state and from out-of-state), take time off from work, rent hotel and Airbnb rooms, and make other logistical arrangements and game-day plans. Postponing a game even a day later may cause severe attrition in terms of fan attendance, which in turn can cause ticket, concessions, and merchandise sales to drop accordingly.
If a game is cancelled, the league’s policy may provide coverage for loss related to the television contract, as well as any related advertising contracts. The home team’s policy should cover losses related to tickets, vendors, pre-game advertising and/or media productions, parking, and the like. Thus, depending on the loss at issue and the nature of the event, coverage for lost profits may be available under policies issued not only to the team or event promoter, but to other involved entities, such as the governing league or conference, as well—if coverage is carefully placed on the front end.
To guard against these losses, teams can choose to insure the amount of expected gross revenue from a home game. In addition, policies may offer additional coverages such as loss-of-deposits coverage; coverage for amounts paid to manage media publicity about the cancellation or rescheduling; or coverage for costs and expenses a team incurs for postponing a home game.
College football games held in NFL teams’ stadiums
With the NFL season just starting out, college football season has found its stride, and with it, another trend: neutral-site games. During the opening weekend, West Virginia and Virginia Tech played their season opener at FedEx Field, the home of the Washington Redskins. The Florida Gators and Michigan Wolverines also faced off in AT&T Stadium, the home of the Dallas Cowboys. Finally, Florida State and Alabama squared off in a prime-time matchup in the Atlanta Falcons’ brand-new $1.6 billion Mercedes-Benz Stadium. These games have proven themselves to be big box-office draws for fans and television audiences alike. NFL stadiums often provide the perfect venues for these contests.
These neutral-site games further underscore the importance of having event-cancellation insurance in place before kickoff. Despite fans’ excitement for the start of the season, the elements can often disrupt even the most well-laid plans, especially because the beginning of football season often coincides with the arrival of hurricane season and other, uncooperative weather. Hurricane Harvey, for example, forced Houston to postpone its game with UTSA. BYU and LSU also had to relocate their game, originally scheduled to take place in Houston’s NRG Stadium (the home of the Houston Texans), to the Mercedes-Benz Superdome, the home of the New Orleans Saints.
In addition, many neutral-site (and bowl) games now have fan events taking place in the hours or even days leading up to kickoff. Some of these events include luncheons, media events, pep rallies, pre- or post-game concerts, and other activities designed to increase fan participation and enjoyment. These accompanying gameday events can require substantial amounts of “buildup” (for example, building a stage, or installing bleachers, speakers, etc.) and “teardown” (for example, taking apart that same stage or those same bleachers after the event has concluded). Teams and event hosts should make sure they choose beginning and end dates to guarantee coverage for this entire period of time, should something go awry.
Other events held in teams’ stadiums
NFL stadiums also play host to events other than pro football games and sporting events, such as high-profile concerts, circuses, conventions, conferences, fairs, festivals, and road or trade shows. These events, too, require insurance, including event-cancellation insurance, to protect amounts paid for or lost profits from these events. If the team or stadium owner is only responsible for stadium security and/or concessions, it may be able to negotiate event-cancellation insurance for only the amounts expended in anticipation of the event, in exchange for a reduced premium. Likewise, teams may be able to obtain a fractional share of coverage, for a fractional premium, under a joint policy that also extends coverage to event promoters, performers, and other interested parties.
Regardless of whether they are producing an NFL game (with all of its accompanying events) or merely serving as hosts for other kinds of events, teams should be careful to review their policy applications. An insurer may be able to rescind its policy on the basis of inaccurate statements made in the policy application, even if the statements were made without intent to deceive. As a result, it is very important to ensure that all statements made in a policy application are accurate, and that the application does not omit any material information. If bad weather arrives and the policyholder needs to file a coverage claim, its insurer(s) could try and rescind, or withdraw, the policy if the application contains any misrepresentations or omissions, even if made innocently. In particular, teams applying for coverage should expect to see questions regarding any prior events cancelled or insurance claims made in recent years.
The annual kickoff of football season serves as a reminder of the importance of securing event-cancellation insurance coverage for gameday and other important events. Securing the best-structured “manuscript,” or custom, policy tailored to an individual organization’s needs requires the advice of sophisticated insurance coverage counsel, so make sure you consult an experienced attorney before placing your coverage. When bad weather arrives, teams that failed to secure adequate protection may find themselves tackled for a loss.
Lorie Masters and Michael Levine are partners, and Tae Andrews is an associate in the Washington, DC office of Hunton & Williams LLP, where they are members of the firm’s insurance coverage practice. Masters, Levine, and Andrews represent and counsel policyholders on insurance-related matters, including claims involving event cancellation, business interruption, contingent business interruption, and other weather-related losses.
