Category Archives: Cancellation

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Lloyd’s of London Doesn’t Want to Pay for Michael Jackson Concert Cancellation

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Just days ago we unveiled the June issue of Risk Management featuring a “Behind the Music” cover story on the many — and sometimes deadly — risks of music festivals written by the infinitely talented Emily Holbrook. While the sex, drugs and rock and roll dangers are more sensational, the possibilities of event cancellation are always logistical nightmares.

Concerts can be called off for any number of reasons.

One died when Michael Jackson did.

And ever since, there has been a behind-the-scenes fight between promoters and insurers about who will foot the $17.5 million bill for the concert that never happened. The promoters had an insurance policy for such a contingency so they think insurers need to pay out. But the Lloyd’s of London underwriters who placed the policy argue that they were never informed of the King of Pop’s prescription drug abuse.

Thus, the dispute.

The insurance policy was taken out to cover the cancellation or postponement of the London concerts in the case of the death, accident or illness of Jackson.

The lawsuit claimed that AEG, who hired Jackson’s physician Dr. Conrad Murray, failed to disclose the singer’s medical history to the insurers “including, but not limited to, his apparent prescription drug use and/or drug addiction.”

The lawsuit further states that [concert promotors] AEG or Jackson or his company knew but did not disclose that Jackson was taking propofol — an anesthetic that is usually restricted to hospital use ahead of surgery.

It adds that attempts to resolve the dispute with AEG Live outside the courts have failed. “Underwriters therefore request that the policy be declared null and void.”

A policy is a policy, right? So maybe Lloyd’s should pay regardless? Then again, full medical disclosure was probably a discussed caveat to the insurance given Michael Jackson’s history. So the concert promoters should be on the hook?

Since resolution attempts have reportedly failed, it will likely come down to policy language and stated/presumed medical disclosure mandates for this type of policy.

But in your opinion, who should pay?

Safeguarding the World Cup

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world cup cape town

For 10 days, the World Cup has been captivating the globe. Widely considered the greatest event in sports, fans have been riveted by the daily matches from South Africa featuring soccer legends like Lionel Messi from Argentina, Cristiano Ronaldo of Portugal and Wayne Rooney of England. But while the players make the “Beautiful Game” look effortless, the preparation to ready the country for this tournament of 32 nations was anything but.

Building stadiums, improving transportation infrastructure and ensuring security took a Herculean effort in a country that escaped Apartheid just 16 years ago and, even today, struggles to overcome societal ills including a 25% unemployment rate, some 50 murders per day and a population where 11% of South Africa’s nearly 50 million citizens live with HIV.

Munich Re, for example, was brought in to aid construction of a new high-speed rail project.

The rail link was planned and approved long before South Africa was awarded the World Cup. However, there is no doubt that the World Cup speeded up the construction project, which was started in 2006.

Munich Re was also involved in the mammoth upgrade of “Soccer City,” the Johannesburg stadium that is the nation’s crown jewel for this year’s World Cup. (See video below for more on the renovation.)

February 2007 saw the beginning of stadium renovation, which was covered by way of a CAR policy. The stadium, renovated at a cost of 300 million pounds and ten million working hours, will host the opening ceremony, the opening game and the tournament final. Its new design takes its inspiration from traditional African pottery and resembles a calabash. The renovation work, completed in October 2009, increased Soccer City’s capacity from 80,000 to 94,000, making it the biggest stadium in Africa.

Additionally, Munich Re insured the construction of at least two other stadiums that were built from the ground up for the World Cup.

Then, of course, comes coverage for the games themselves. In all, some $9 billion in insurance was taken out before the games, most of which covered property, game cancellation, broadcast failure and liability issues.

That’s just for the games themselves. Lloyd’s turned to Chris Nash, an underwriter at Sportscover, for some additional input on the “vast range of potential coverage.” He rattled off a list that includes competitions, offers, prizes, sponsorships, and broadcast rights. “It’s impossible to know how many there are, but all companies with these financial implications need coverage,” he explained. “When you take this into account along with the number of broadcasters around the world airing the games, I’d probably estimate the whole thing at around £3 billion [$4.33 billion].”

What it all comes down to is that, for all companies involved in this year’s World Cup, there is a lot more than goals, trophies and international bragging rights on the line. They stand to make — or lose — millions depending on how the tournament plays out.

The last time the World Cup was canceled was World War II. These days, the business of sports is much bigger, and so are the potential losses.

Between the opening ceremony for the 2010 World Cup on June 11 and the presentation of the trophy a month later, almost 100 hours of live soccer is being broadcast around the world. Soccer federation FIFA earned $2.7 billion in total from the broadcast rights at the 2002 and 2006 World Cups, according to FIFA’s figures.

FIFA said it took out an insurance policy to provide coverage of $650 million in the event of the postponement or relocation of the games. This policy covered acts of terrorism, natural disaster, epidemics, war and accidents. Munich Re’s share of this policy is the largest at $350 million.

And while South Africa, the first country on the continent to host the World Cup, struggles with its reputation as a crime hot spot, crime doesn’t directly affect contingency and liability insurance for the World Cup. Instead, it would have been a concern for fans insuring their trip, according to Emily Hughes, a spokeswoman at Lloyds.
The last time the World Cup was canceled was World War II. These days, the business of sports is much bigger, and so are the potential losses.
Between the opening ceremony for the 2010 World Cup on June 11 and the presentation of the trophy a month later, almost 100 hours of live soccer is being broadcast around the world. Soccer federation FIFA earned $2.7 billion in total from the broadcast rights at the 2002 and 2006 World Cups, according to FIFA’s figures.
FIFA said it took out an insurance policy to provide coverage of $650 million in the event of the postponement or relocation of the games. This policy covered acts of terrorism, natural disaster, epidemics, war and accidents. Munich Re’s share of this policy is the largest at $350 million.

Though the worst threats have been avoided so far, the very first week did provide cause for concern, as striking employees from a private security firm hired to protect a stadium in Cape Town clashed with local law enforcement on June 17.

Police in Cape Town fired a stun grenade and rubber bullets to break up a protest Thursday of more than a hundred private guards who had been hired to provide security at a World Cup soccer stadium.

The clash was the latest incident involving employees of Stallion Security Consortium, whose employees were replaced by police officers at four stadiums around the country after the workers walked off the job in a pay dispute with their employer.

Although the labor dispute hasn’t affected the World Cup games, the incidents highlight simmering tensions in a country where many workers remain poorly paid and unemployment is about 25%. State power company Eskom is in the midst of negotiations to avoid a pay strike that could disrupt electricity supplies. A three-week strike over wages last month paralyzed the country’s ports and freight rail.

Fortunately, security has still largely been maintained throughout the country since the tournament began and the worst fears of many have not been realized, despite this first scare. Let’s hope it is also the last.

A video showing the transformation of Soccer City in Johannesburg into the largest, most iconic stadium in Africa.

Super Bowl Risk

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All major sporting events pose some sort of risk — whether it’s unruly fans, unsafe venues, lack of security or all of the above. But there are a few sporting events that pose more risk than others — namely the Olympics, the World Cup and, of course, the Super Bowl. I was fortunate enough to get some feedback on Super Bowl risk from Chris Rogers, director of risk control for National Entertainment Group, a part of Aon Risk Services and Lori Shaw, managing director of sports/leisure for Aon Entertainment Group.

Of all the potential risks facing such a large event as the Super Bowl, what do you feel is the number one biggest risk on February 7th?
Without a doubt, the biggest risk by far is the “lone wolf” with explosives knowledge. It is the very quiet ones, without support from any organization at the time that presents the greatest challenge, simply because there is so little possibility for detection prior to their arrival on the scene. Plus, if they have the ability to put together an IED, this combination could be very catastrophic.
Do you feel there is more potential for risk before, during or after the game?
The highest risk would be during the game, primarily due to the fact that this is when there are the most people present and there is so much going on all over the stadium. The close second would be just prior to the start of the game when there are large crowds lining up waiting to get inside.
Lori Shaw, Managing Director – Sports/Leisure, Aon Entertainment Group
How are corporate sponsors and marketers managing the financial risks related to prizes and promotions?
Many corporations look to events such as the Super Bowl as a way to create impressions with consumers. Besides basic TV, advertising many look to specialized promotions and prize offerings to attract interest and support their marketing goals. This may mean offering product couponing and redemptions offers to drive consumers to their brands, arranging prize trips for consumers, and often times, offering the potential to win large cash prizes such as what Dorito’s is doing with its Dorito’s “Crash the Super Bowl” promotion. Often times, corporations will look to the Contingency Insurance market to provide unique and customized insurance products to protect their balance sheets from the volatility that these promotions can bring. Products such as overredemtion insurance, sponsorship liability, marketers liability, special event and travel accident coverage and prize indemnity policies can be crafted to appropriate transfer this type of potential risk.
How does the Super Bowl manage challenges such as professional liability? What types of insurance can the Super Bowl event managers and organizers obtain to protect themselves from the many potential risks that can occur during such a large event?
Planning for large events, such as the Super Bowl, start way before the “kick off” of the game. Local organizing committees have been working months, sometimes years, ahead of a large event to make all the necessary arrangements. Insurance coverages that are contemplated may include: General Liability, Auto Liability, Property, Directors & Officers, Terrorism, Event Cancellation (which can include weather related perils, communicable disease, and threats of Terrorism), Media Liability, Broadcast and Professional Liability for things like police, EMT’s, physicians, etc.

RMM: Of all the potential risks facing an event as large as the Super Bowl, what do you feel is the number one threat on February 7?

Chris Rogers: Without a doubt, the biggest risk by far is the “lone wolf” with explosives knowledge. It is the very quiet ones, without support from any organization at the time that presents the greatest challenge, simply because there is so little possibility for detection prior to their arrival on the scene. Plus, if they have the ability to put together an IED, this combination could be very catastrophic.

RMM: Do you feel there is more potential for risk before, during or after the game?

Rogers: The highest risk would be during the game, primarily due to the fact that this is when there are the most people present and there is so much going on all over the stadium. The close second would be just prior to the start of the game when there are large crowds lining up waiting to get inside.

RMM: How are corporate sponsors and marketers managing the financial risks related to prizes and promotions?

Lori Shaw: Many corporations look to events such as the Super Bowl as a way to create impressions with consumers. Besides basic TV advertising, many look to specialized promotions and prize offerings to attract interest and support their marketing goals. This may mean offering product couponing and redemption offers to drive consumers to their brands, arranging prize trips for consumers, and oftentimes, offering the potential to win large cash prizes such as what Doritos is doing with its Doritos “Crash the Super Bowl” promotion. Oftentimes, corporations will look to the Contingency Insurance market to provide unique and customized insurance products to protect their balance sheets from the volatility that these promotions can bring. Products such as overredemtion insurance, sponsorship liability, marketer’s liability, special event and travel accident coverage and prize indemnity policies can be crafted to appropriately transfer this type of potential risk.

RMM: How does the Super Bowl manage challenges such as professional liability? What types of insurance can the Super Bowl event managers and organizers obtain to protect themselves from the many potential risks that can occur during such a large event?

Shaw: Planning for large events, such as the Super Bowl, start way before the “kick off” of the game. Local organizing committees have been working months, sometimes years, ahead of a large event to make all the necessary arrangements. Insurance coverages that are contemplated may include: general liability, auto liability, property, directors and officers, terrorism, event cancellation (which can include weather related perils, communicable disease and threats of terrorism), media liability, broadcast and professional liability for things like police, EMTs, physicians, etc.

soccer fans

Jackson’s Tour and Cancellation Coverage

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Michael Jackson’s death may stick insurers with a $24 million bill over cancelled concerts.

Apparently, AEG Live, the promoter of Jackson’s 50 concert dates, purchased cancellation coverage for only three dates on the tour. This was because insurers found the singer too frail and too large of a risk when it came to coverage.

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Insurance market Lloyd’s of London said its member corporations had underwritten some insurance taken out for the Jackson concerts, but said AEG is likely to be have had multiple policies with several insurers, who would each have taken on a portion of the risk.

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It was reported that Los Angeles-based AEG would self-insure any shows it was unable to obtain insurance for. Though it is not yet clear which other insurers, if any, AEG used for coverage, what is clear is that someone will be stuck with a large bill for a tour that many feel was too risky and overly ambitious from the start.

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