Takeaways from Barbara Dunn, Esq.:
- Review contracts to determine whether there is any provision which may excuse the group’s performance based on COVID-19.
- Check your event cancellation insurance policies.
- Examine communications to meeting attendees, exhibitors, vendors, and other stakeholders.
We continue to receive news, updates, witness accounts, videos, and other information regarding the COVID-19 coronavirus — and closer to home, learn of the limitations placed on conferences and trade shows, or decisions made to cancel them altogether, by their organizers as a result.
Many organizations are considering whether and how they should address the potential impact of COVID-19 on their upcoming meetings and events. My recommendation: Meeting professionals should closely examine their organization’s contracts, insurance, and communications for upcoming meetings and events. This important examination will provide the organization’s leadership with the information it needs in order to make informed decisions regarding those meetings and events and to communicate appropriately with its meeting vendors, attendees, and stakeholders.
Check Your Contracts
With any meeting or event, there are myriad contracts in place: hotels, convention centers, decorators, audiovisual companies, and destination management companies, to name just a few. Meeting professionals should review those contracts and determine whether there is any contract provision — typically the force majeure provision — which may excuse the group’s performance based on COVID-19.
As with any force majeure provision, the burden of proof will be on the party — group or facility/vendor — which elects to enforce its rights under the provision. That means that the cancelling party (or the party which seeks to perform but in a reduced manner — see below) must show:
1) that COVID-19 falls within the list of unforeseen items listed in the force majeure provision (such as Acts of God, weather, fire, etc.) and that if it does, 2) that COVID-19 impacted performance in such a way as required in the provision, such as impossible, illegal, or commercially impracticable — the latter of which is my preference.
If the group can prove both elements of the provision, it can take the position that its performance of the contract is excused and that no cancellation fee is due. Every contract and every circumstance is different, so there are no general rules when it comes to whether a force majeure provision in a contract will excuse the group’s performance — the group must consult its attorney to determine its rights under each contract.
Note also that many force majeure provisions may permit the group to perform the contract (despite the fact that the clause may permit the group to cancel the contract without liability) and that if it does, the hotel/vendor will reduce or eliminate any fees that the group would incur as the result of reduced attendance, such as room block and food and beverage attrition fees. Even when the provision does not include this language, groups can still ask hotels to reduce or to waive such fees. Essentially, the argument is “some business is better than no business” and both parties have an interest in working together.
Bottom line, meeting professionals should evaluate whether the contracts it has in place address this issue and whether their standard language will, going forward, protect against them in circumstances of a disease outbreak as well as similar unforeseen circumstances.
In addition to contracts, check your event cancellation insurance policies. Unfortunately, many organizations do not purchase such coverage for their meetings and events — many citing that the policies are too expensive or are not worth it because they no longer cover terrorism (although such coverage is available to some extent with payment for an endorsement).
Yet with many contingencies, event cancellation insurance can prevent or minimize an organization from going out of business as a result of 1) losses sustained by having to cancel a meeting, or 2) suffering lower revenues as a result of reduced attendance, or 3) having to stop the meeting early or start it late. Event cancellation insurance is essentially a type of business interruption insurance and should be considered for any group meeting or event that makes revenues for the group.
As with any insurance policy, meeting professionals must review what items are covered by a policy but also what items are not covered by a policy (exclusions). Often on event cancellation insurance policies, infectious or communicable diseases are excluded from coverage. If meeting professionals want coverage for infectious or communicable diseases, they will need to ask the carrier for an endorsement to cover such items and, if approved, the group will pay an additional premium for such coverage.
Note that policies and endorsements to insurance policies must be reviewed carefully by the group’s insurance broker, attorney, and business team to confirm what is/is not covered by the policy. Many infectious or communicable disease endorsements also carry their own exclusions (such as avian flu) and such exclusions are not eligible for coverage with an endorsement.
So, it is critical that meeting professionals review their event cancellation insurance policies carefully with its legal and leadership teams to determine coverage. And for meeting professionals considering purchasing event cancellation insurance for upcoming meetings, they will likely find that any coverage for infectious or communicable diseases may be further limited including an exclusion for COVID-19.
One last comment about event cancellation insurance policies: Such policies cover both outright cancellations as well as reduced attendance. So, depending on whether the circumstance affecting the meeting is covered under the policy, the coverage protects the bottom-line revenue earned from the meeting as well as any related expenses. This is a generalization of a very complicated coverage statement, so it’s best to consult your policy and your attorney.
Communicating With Stakeholders
Finally, meeting professionals should examine their communications to meeting attendees, exhibitors, and other stakeholders as well as to hotels and other meeting vendors. If the group has upcoming meetings and has received inquiries as to whether the meeting will continue in light of COVID-19, the group should have an appropriate statement prepared in response. The text of the statement should be reviewed by the group’s leadership and attorney prior to distribution. All further statements should be consistent with the group’s initial statement unless circumstances change and the group and its legal counsel determine otherwise.
Communication with hotels and other vendors is important as well. If the group has concerns about how COVID-19 may be impacting its upcoming meeting or event at the hotel, it is important for the group to communicate its concerns with the hotel. While the group may not be excused from performance or reduced performance (under the contract’s force majeure provision), it can still work with the hotel to maximize its attendance and to minimize any impact associated with concerns over COVID-19.
Barbara Dunn ([email protected]) is a partner with the Associations and Foundations Practice Group at Barnes & Thornburg where she concentrates her practice in association law and meetings, travel, and hospitality law.
This article shall not be considered legal advice. In all cases, groups should consult their legal counsel. Further, this article shall not be considered as insurance advice — groups should always contact their insurance broker and carrier for specific details regarding their insurance coverage.
©Copyright 2020. Barbara F. Dunn, Esq., Barnes & Thornburg LLP. All rights reserved under both international and Pan American copyright conventions. No reproduction of any part may be made without the prior written consent of the copyright holder.
What Events Professionals Need to Know About COVID-19
PCMA has created a COVID-19 resources page to help event professionals find reliable information about the outbreak and to share events industry-related resources to ensure they are prepared.