The Situation: A Pandemic Creates Travel Uncertainties
For member-based trade associations, annual conference revenues represent a sizable portion of the organization’s total revenue. So, when a travel-based trade group found its 2020 international conference threatened by COVID-19 restrictions, mitigating the financial damage was essential.
The conference was scheduled to occur in Las Vegas, Nevada in June, mere months after the pandemic hit the US in March. Though the pandemic was an unprecedented event in modern history, and there was little certainty about how it would unfold, early signs indicated it was highly unlikely the event could proceed as planned.
At Risk: Millions in Revenue
The association draws 6,500+ attendees to its annual conference, with a large percentage hailing from outside the US. The conference also attracts many vendors that pay substantial fees to reserve exhibit hall space and sells sponsorship packages that run as high as tens of thousands of dollars.
If the pandemic-related travel and gathering restrictions forced the association to cancel the 2020 conference, it would need to refund millions of dollars to registrants, exhibitors, and sponsors and forego lost costs for the venue, speakers, and other expenses, posing a substantial financial hardship.
The Challenge: The Great Unknown
With registrants, exhibitors, and sponsors all asking whether the event would occur as planned, the association needed to make a firm decision on a tight timeline. But with the situation continually evolving, with little certainty or consensus, that was proving difficult.
As of May 2020, many countries were still imposing COVID-19 travel bans and restrictions on group gatherings, without explicit expiration dates. There was little confidence that by June, airlines would be flying into the US, hotels would be open, and venues would be hosting large groups.
The Complication: An Unprecedented Scenario
With B. F. Saul Insurance as its advisor, the association had purchased Event Cancellation Coverage and added an Infectious Disease Endorsement at a nominal cost. Since the three-year policy stated the insurer would indemnify the association in the event of cancellation, abandonment, curtailment, or rescheduling due to an unexpected cause beyond its control, at first glance the claim appeared straightforward. However, the definitions of the policy were strictly enforced and had to be met prior to a coverage determination.
Moreover, there is always a requirement to mitigate damages through efforts like attempting to reschedule the event. That might be possible in situations such as a storm that only interrupts travel for a few days. But in this unique case, with no clarity on when travel bans and gathering restrictions would be lifted, the association had no confidence in rescheduling.
The Obstacle: A Traditional Claims Mindset
When B. F. Saul notified the insurer in March that the association planned to file a claim, the adjuster said it wasn’t reasonable or necessary to cancel the event yet; instead, the insurer preferred to take a wait-and-see approach.
That might have worked for some of the traditional perils that trigger an event cancellation, but not in an unprecedented pandemic. For example, the adjuster argued it was reasonable to assume that stay-at-home orders and social distancing requirements would be lifted in time to proceed with the conference, with no evidence or precedent to support this belief. Worse, the county announced the convention center would serve as a patient care site if area hospitals reached capacity, with the expected usage period overlapping the conference dates.
Faced with these realities, in May the association notified attendees, exhibitors, and sponsors of its decision to cancel the conference and requested that the insurer agree coverage had been triggered. The claims negotiations then began in earnest.
The Solution: Create a Compelling, Fact-Based Argument
With the insurer taking a hard stance against the need to cancel, B. F. Saul realized that an effective claim outcome required detailed research and extensive documentation. As the claims process “quarterback,” our team leveraged its expert understanding of the policy’s terms and conditions, organized the gathering of a huge volume of data, and developed a compelling argument to demonstrate the trade group had no choice but to cancel the event, triggering coverage.
Our documentation (which included hundreds of civil orders) showed the following:
- Aggressive government orders in at least 43 states required some 300 million people to social distance and stay at home except for essential activities, with most mandates in effect until after the conference date or until the pandemic emergency concluded.
- Even as social distancing requirements were scheduled to ease, they were expected to remain in effect at some level through the conference date.
- An executive order by the governor of Nevada required large venues to remain closed, rendering the convention center unavailable.
- Even if the order to close venues was lifted in time, the conference center couldn’t accommodate 6,000+ attendees and still adhere to social distancing requirements.
- President Trump had prohibited entry to the US from China and the European Union, and many international airlines had cancelled inbound flights to the US—preventing the estimated 30% of delegates located outside the US from attending.
B. F. Saul also provided a detailed log of the association’s communications with key stakeholders to demonstrate its diligent, exhaustive efforts to avoid cancellation. At a high level, this log illustrated several key milestones:
- The association had begun assessing contingency plans as early as February, before a pandemic was officially declared in the US and ahead of the lockdowns and gathering restrictions.
- By early March, the group was working with the convention center and the Las Vegas Convention and Visitors Authority to assess available dates for rescheduling, should government mandates allow venues to reopen.
- By early April, it had become clear there were no alternate dates or venues available through year-end.
B. F. Saul concluded that coverage should move forward under the policy’s “Enforced Reduced Attendance” provision, defined as “the enforced inability of Participants to travel to attend the Event solely and directly as a result of the same specific cause not otherwise excluded hereunder.” Pandemic travel bans, stay at home orders, lockdowns, and social distancing requirements meant that “enforced inability of the Participants to attend the Event” existed.
The Result: Over $10 Million Recovered
After many months of researching, documenting, and negotiating, the insurer agreed to cover the event cancellation. Now the conversation shifted to damages.
B. F. Saul participated in discussions with association representatives, the group’s attorney, the insurance carrier, and the reinsurer to agree on net losses. One of the key negotiating points was to move the insurer from its initial position of issuing credits (in lieu of refunds) to registered attendees, sponsors, and exhibitors. This approach would have greatly harmed the association’s goodwill with these constituents and jeopardized the substantial repeat business they represent. For example, about 97% of members who attended the 2018 conference returned in 2019—a track record that the association didn’t want to derail.
Thanks to the B. F. Saul team’s diligence and expertise, the association recovered more than $10 million, which included reimbursement of:
- Registration refunds for attendees, sponsors, and exhibitors
- Speaker fees already paid
- Out-of-pocket costs already incurred (e.g., marketing and signage printing)
- Fees for contracts that could not be cancelled due to force majeure (e.g., service providers, venue fees, and hotel rental)
B. F. Saul Insurance helps non-profit organizations and other businesses protect their assets against a wide range of risks and exposures, with claims specialists who have the experience and knowledge to advocate for the best outcome. Visit our website to learn more.
In order to bring the best content to our readers, we feature various writers from within B.F. Saul who have advanced expertise in key, niche areas of insurance. This is an article by featured writer, Brandon Newlands, B.F. Saul Insurance's Vice President, Senior Director of Coverage and Claims.
Brandon is responsible for leading our Claims Advocacy practice and supporting clients in the event of a claim or complex coverage issue, and opining on current litigation and regulatory trends impacting our clients