Partner Mikaela Whitman discusses event cancellation insurance and the coronavirus with Sports Business Journal.

By Adam Stern and Bill King.  Originally published March 9, 2020, at https://bit.ly/2y55Riv

The specter of having to cancel sporting events due to the coronavirus has grown recently, and experts say that only the properties with proper insurance will stave off substantial losses, should such fears come to fruition.

Though no major events have been canceled, or even postponed, through last Thursday, insurance experts are recommending teams, event operators and venues check their policies, which can vary greatly.

In most cases, coverage will be dictated by a policy holder’s event cancellation coverage, and the exclusions written into it. Some policies cover cancellations due to an outbreak, but exclude specific diseases, such as SARS, for example.

One law firm that represents policy holders in disputes with insurers advises event operators and facilities to review not only their event cancellation policies, but also those covering property damage, civil unrest and even political risk.

“One of the things we’re cautioning policy holders is, because this language is so different from policy to policy, don’t assume you don’t have coverage,” said Mikaela Whitman, a partner and founding member of the insurance recovery team at New York law firm Pasich LLP. “It can depend on how disease is defined. Is [COVID-19] a disease or a virus? Does it fit into the special language of the policy? It will really come down on a case-by-case basis.”

In motorsports, variations stem not only from policies, but race formats.

Darren Hickey, sports and entertainment adviser for Hub International, said that many races do not have event cancellation insurance, because so many of the events are held at permanent venues, where the events can simply be postponed until a later date.

However, temporary street circuits like the ones seen in IndyCar and Formula One often involve contracts with cities that stipulate the precise window when a race must be held, so any postponements by those organizers could lead to an outright cancellation.

“Some tracks will buy event cancellation coverage to indemnify themselves in the event that the race doesn’t happen to protect income from the TV broadcast, concessions, tickets they’ll have to refund and [revenue from] VIP suites and motorhome rentals,” said Hickey. Unfortunately, he said, “in 2020, it’s not a prevalent purchase.”

Hickey said that any property now trying to add event cancellation coverage amid the outbreak of coronavirus will find it next to impossible to get a plan that covers a game or race called off due to its impact.

One race that could be nervous is the NTT IndyCar Series’ Long Beach Grand Prix, scheduled in mid-April, as that is a temporary street circuit located on the West Coast, which has been hit hardest by coronavirus in the U.S. so far.

Outside the U.S., some events have opted to play in empty stadiums and arenas rather than canceling entirely.

Along with preserving the integrity of the schedule with playoffs or end-of-season tournaments approaching, playing in an arena without spectators could buffer teams’ financial losses.

Playing without spectators likely would enable those covered for a cancellation in the event of an outbreak to recoup lost revenue from tickets and concessions, said Tim Browne, an attorney in the Nashville office of Bass, Berry and Sims who began his career at the NBA and now works with clients across sports and event operators. Those without coverage couldn’t do that, but they could preserve revenue from media rights and advertising.

“It probably doesn’t make for a great viewer experience,” Browne said. “But I’ve never seen a media contract specify that a game had to be played with any number of fans in the building.”