Are You a Nonprofit that Had to Cancel Your Event Because of COVID-19?

     On Wednesday, March 11, 2020, the World Health Organization (WHO) declared COVID-19 (also known as the 'coronavirus') a "pandemic."  According to the WHO, a pandemic is a "global outbreak of an infectious disease."  Governors in thirty states (including our own Governor Roy Cooper here in NC) have already declared state emergencies.  Here in North Carolina, Governor Cooper via executive order, has closed our schools for two weeks and banned mass gatherigns of over one hundred (100) people.  The US Centers for Disease Control (CDC) has recommended against any gathering of fifty (50) or more people in the United States for the next eight (8) weeks.  Hence, if you are a nonprofit organization (particularly a trade association), you may have had to already or will have to cancel a convention or a conference you have been planning for months.

     For many of these nonprofits (particularly trade assocations), hosting a conference or convention is a major annual revenue driver.  Nonprofits organizing these events may be wondering - Is the financial hit we are going to take from canceling this conferrence covered by insurance and can we recoup such losses?

     First, the nonprofit hosting organization is going to need to check their event cancellation policy, if it has one, as this policy is the most likely to provide this sort of coverage.  For those unclear about event cancellation insurance, it is typically written to cover specific events (like a conference or convention).  This type of insurance can cover lost revenues, increased expenses, diminished attendance, and costs to reschedule the event.  For example, some event cancellation policies provide coverage for hotel penalties when room commitments are not fulfilled.  There is not a uniform event cancellation policy so each policy is specific to the policy holder's needs and requests when written.

     As with any insurance coverage, there are exclusions.  An exclusion is a policy provision that eliminates coverage for some type of risk.  Exclusions narrow the scope of coverage provided by the insuring agreement.  Common exclusions found in an event cancellation policy include lack of interest or support for an event, a preexisting condition, terrorism, breach of contract, financial failure of a venture and "communicable diseases."

     With COVID-19, the key question is does the 'communicable disease' exclusion apply, and if so, did the policy holder pay extra to purchase coverage "extension" that will cover losses from communicable diseases, even if base coverage cannot?  As I mentioned above, the WHO did designate COVID-19 as a 'pandemic.'  This is important because many event cancellation polices use the WHO declaration as a trigger for the communicable disease exclusion.  Some policies contain language that provide that an exclusion occurs if the World Health Organization (WHO) declares an epidemic or pandemic and you are only covered if your claim is submitted to the carrier before or simultaneously with the WHO declaration.  Knowledge and timing are everything with insurance claims (knowing what is coverred and how its covered and filing your claims in a timely manner).  Insurance carriers are going to be facing a lot of claims right now.  As a result, many insurers are going to take an aggressive negotiating posture regarding event cancellation claims that are not clearly covered.  

     The attorneys at Hull & Chandler are available to counsel nonprofits who have had to cancel their events (conferences, conventions) this year because of COVID-19 regarding their options and their best arguments for coverage.  Going forward, we can advise your nonprofit about appropriate coverage and guide you through the claims process as well.

     On Wednesday, March 11, 2020, the World Health Organization (WHO) declared COVID-19 (also known as the 'coronavirus') a "pandemic."  According to the WHO, a pandemic is a "global outbreak of an infectious disease."  Governors in thirty states (including our own Governor Roy Cooper here in NC) have already declared state emergencies.  Here in North Carolina, Governor Cooper via executive order, has closed our schools for two weeks and banned mass gatherigns of over one hundred (100) people.  The US Centers for Disease Control (CDC) has recommended against any gathering of fifty (50) or more people in the United States for the next eight (8) weeks.  Hence, if you are a nonprofit organization (particularly a trade association), you may have had to already or will have to cancel a convention or a conference you have been planning for months.

     For many of these nonprofits (particularly trade assocations), hosting a conference or convention is a major annual revenue driver.  Nonprofits organizing these events may be wondering - Is the financial hit we are going to take from canceling this conferrence covered by insurance and can we recoup such losses?

     First, the nonprofit hosting organization is going to need to check their event cancellation policy, if it has one, as this policy is the most likely to provide this sort of coverage.  For those unclear about event cancellation insurance, it is typically written to cover specific events (like a conference or convention).  This type of insurance can cover lost revenues, increased expenses, diminished attendance, and costs to reschedule the event.  For example, some event cancellation policies provide coverage for hotel penalties when room commitments are not fulfilled.  There is not a uniform event cancellation policy so each policy is specific to the policy holder's needs and requests when written.

     As with any insurance coverage, there are exclusions.  An exclusion is a policy provision that eliminates coverage for some type of risk.  Exclusions narrow the scope of coverage provided by the insuring agreement.  Common exclusions found in an event cancellation policy include lack of interest or support for an event, a preexisting condition, terrorism, breach of contract, financial failure of a venture and "communicable diseases."

     With COVID-19, the key question is does the 'communicable disease' exclusion apply, and if so, did the policy holder pay extra to purchase coverage "extension" that will cover losses from communicable diseases, even if base coverage cannot?  As I mentioned above, the WHO did designate COVID-19 as a 'pandemic.'  This is important because many event cancellation polices use the WHO declaration as a trigger for the communicable disease exclusion.  Some policies contain language that provide that an exclusion occurs if the World Health Organization (WHO) declares an epidemic or pandemic and you are only covered if your claim is submitted to the carrier before or simultaneously with the WHO declaration.  Knowledge and timing are everything with insurance claims (knowing what is coverred and how its covered and filing your claims in a timely manner).  Insurance carriers are going to be facing a lot of claims right now.  As a result, many insurers are going to take an aggressive negotiating posture regarding event cancellation claims that are not clearly covered.  

     The attorneys at Hull & Chandler are available to counsel nonprofits who have had to cancel their events (conferences, conventions) this year because of COVID-19 regarding their options and their best arguments for coverage.  Going forward, we can advise your nonprofit about appropriate coverage and guide you through the claims process as well.