Risky Business

Evaluating your insurance needs

By Brenda Ordonez

In an age of lawsuits on demand, social disorder and unprecedented natural disasters, exposition managers today are faced with situations that can spell financial disaster.

"The show manager has to be a risk manager," says Jack Buttine of John Buttine Inc., show insurance specialists in New York City. Show producers who aren't identifying their exposure to liability, and who aren't minimizing, passing on and insuring themselves against those risks, could be gambling with their livelihood.

"There's no room for error," says George Gonsalves, President of North East Promotions in Wethersfield, CT, "because it can put you out of business."

Liability protection
"There are three ways a show manager assumes liability," says Jed Mandel, an attorney with the Chicago law firm of Neal Gerber & Eisenberg, "statutory, common law and contractual." Mandel cites as examples, the dram shop law, negligence and facility contracts, respectively.

According to Michelle Holmes, Vice President of Commercial Lines at Huntington T. Block Insurance Agency in Washington, DC, the lines of insurance important to show producers -- both public and trade, are:

• General liability for everyday business
• Property coverage at the office and on-site
• Commercial general liability
• Worker's compensation -- required by statute
• Auto
• Liquor liability
• Fidelity-bonding of employees
• Show cancellation/impairment

Convention centers generally require proof of coverage before a show moves in, with a minimum dollar protection amount ranging from $1 to $5 million. Other types of insurance may also be required by facilities. The Oregon Convention Center, for example, asks for proof of worker's compensation and auto insurance.

Understanding the risks inherent to a show is an important factor in insuring that show. Operating machinery is an integral part of the International Woodworking Fair, and John Zinn, Executive Director, adds additional liability coverage accordingly. Dale Robbins, Show Manager for the Miami International Boat and Sailboat Show -- open to both trade and the public -- has different levels of coverage because he has indoor, outdoor and in-water exhibits.

What's not included in a policy can sometimes be more important than what is. Huntington Block, President of Huntington T. Block Insurance, cautions show managers to be very careful about the policies they accept -- as no policy is completely comprehensive.

Because they primarily provide third party liability coverage, most general liability policies exclude property in the care, custody and control of the show manager. For instance, damage to the show office or to exhibit hall floors or walls is not generally covered. Common areas in the facility may also be excluded. Bodily injury to show management and staff is also not covered under a general liability policy -- that's covered by the association or company worker's compensation policy.

Other exclusions can include fire, theft, liquor sales and those exposures that are unique or unusual. And since unique and unusual is often the name of the game in the exposition industry, special insurance coverage is available for special risks.

Specialty insurance
Depending on the nature of the show, and when and where it's held, many show managers purchase specialty insurance, such as rain coverage for outdoor exhibits, earthquake coverage for California events or libel and slander protection for the content and material presented at educational programs.

"Hosted events, such as spouse tours, cocktail receptions and fun runs, are fraught with liability exposure, and may require very specific coverage," says Holmes. An evening cruising the Mississippi in a paddlewheeler, for example, may require special coverage, since most general liability policies exclude water craft.

Fidelity insurance covers employee dishonesty -- an important consideration for show managers with sizeable cash and credit card receipts on-site. The policy has to be specifically written to cover off-premises exposure and persons other than regular employees who handle receipts.

Some associations and corporations purchase a professional liability policy which protects directors and board members from lawsuits resulting from errors and omissions. Coverage can also be extended to show managers on staff. If, for instance, the booth selection process were changed, and an exhibitor sued because he lost a prime location, the policy would protect show management.

The rates vary according to the scope of the exposure, but the minimum premium for most professional liability policies is around $2,500 annually. The American Society of Association Executives sponsors a package program covering liability and property for associations, underwritten by Traveler's Insurance.

Cancellation/impairment/interruption insurance protects show expenses and lost revenues resulting from occurrences outside the show manager's control, such as natural disasters, fire, strikes, etc. Policies can reimburse show management for reduced attendance, cover exhibitor refunds and hotel and hall cancellation fees.

Although more show managers are now buying cancellation insurance, the debate over its worth continues. But Gonsalves is definitely on the "pro" side after his policy protected his gate revenues when his public show was shut down last March by a massive storm system in the Northeast.

"We'll pay close to $2 million in claims because of that storm," says Kathleen Trautmann, Account Executive at Albert Wohlers & Co. in Park Ridge, IL.

As with all forms of insurance, show managers must weigh the risks involved against the cost of specialized insurance.

Contractual liability
"Show managers seem to be signing facility contracts which are ever more friendly to the venue," says Huntington Block. "Sometimes they obligate themselves to liabilities which their insurers may not be inclined to accept."

Patricia Conley, Senior Account Analyst with Albert Wohlers, agrees: "If you sign a contract agreeing to be responsible for any and all claims, you are responsible for anything that happens in that facility. If the roof falls in, you could be liable."

Signing such a facility contract, without sufficient insurance to cover the risk, can cause catastrophic repercussions for any organization. As John Smith, General Manager of the Georgia World Congress Center in Atlanta, points out, "Most facility contracts have clauses that say, in effect, any omission of coverage does not relieve the show of responsibility."

As a matter of routine, most show managers now consult with their legal advisors and insurance brokers before signing any facility contract.

Indemnification
"Hold harmless" clauses which indemnify the facility are becoming increasingly worrisome to many show managers. Some feel that facilities are asking them to assume all the risk -- and the cost -- for areas which may or may not be in their control.

"We typically negotiate the 'hold harmless' relative to specifics," says Verne Packer, Senior Vice President of the Trade Show Division at Miller Freeman in Dallas. "We won't assume responsibility, if, for example, another event is in the building, or if the building is under partial construction."

But indemnification is a two-way street. Show management requires indemnification from exhibitors and service contractors. Contractors then seek indemnification from subcontractors, and so on. It's what Steven Hacker, President of the International Association for Exposition Management, calls "the game of passing on the hot potato." IAEM will soon release a new fact file on the topic. "Our advice to show managers," says Hacker, "is never assume all liability for what happens in the convention center."

Smith says the clause is not negotiable at his state-owned facility because Georgia law prohibits third party indemnification.

On the other hand, Jeff Blosser, Director of the Oregon Convention Center, will negotiate, and says the language of their indemnification clause has been changed to spell out responsibilities more clearly. "I think you'll see that happening at more facilities because it's becoming such a major issue."

The Professional Convention Management Association has addressed the subject of convention facility contracts by appointing a task force to recommend guidelines to help make contracts fair, balanced, flexible, understandable and tailored to the industry. The resulting White Paper, recently issued by PCMA, recommends, among other things, that event producers furnish the primary policy covering all claims except those that result from facility negligence. Smith, a task force member, says that having one policy defend all claims will reduce insurance and legal costs for all parties.

"The problem contractually," says Dick Cain, President of Cain Agencies, an insurance consultant on the task force, "is that 'negligence' has not been defined."

Certificates of insurance
Show managers minimize their risks by requiring proof of liability coverage from exhibitors. Minimum coverage is usually $1 million. Most exhibitor contracts ask for proof of insurance, but the degree of enforcement varies throughout the industry. Some show managers feel it's not worth the hassle; others are rigorous. Liberty Productions in Harrisburg, PA, for instance, requires proof of insurance as a condition of move-in at their consumer car shows.

Service providers should also be required to submit proof of insurance -- from the decorator to the shuttle bus operator. Even the caterer should be included -- they carry product liability insurance. Most vendors willingly comply. Show managers can further protect themselves by asking vendors for indemnification, and by being named as an additional insured on their policies.

Certificates of insurance should be checked thoroughly to make sure they comply with show management requirements. "Make sure the insurance can't be cancelled without advance notice to the show manager," says attorney Mandel. Others check the name of the insurer, and consult their own brokers if the company name is unfamiliar.

Insurance rates
The cost of insurance varies considerably based on the dollar amount of the protection, the type of coverage, show location and time of year. Policies become more expensive the closer they are bought to show dates. Also, umbrella coverage is usually more cost-effective than purchasing separate policies for various risks.

Insurance rate increases, if any, will generally occur after each January and July, since that's when the underwriters -- who ultimately foot the bill -- review the business booked by insurance companies.

Insurance broker Cain feels there's a good chance the insurance industry is going to have to recoup some of its losses due to hurricanes Andrew and Iniki. (Andrew's tab alone is now at $18 billion.) "And," he adds, "in the specialty areas particularly workmen's compensation -- what the Clinton administration does with health insurance could create a significant problem for the exposition industry."

While increases are not expected in 1993, substantial increases may be seen in 1994. Buttine expects increases of 10 to 15 percent on liability, property and cancellation policies.

Although being a full-time risk manager will probably never appeal to those who crave the excitement of show management, it is nonetheless a job skill worth cultivating. Show business is, after all, a risky business.