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Party Crasher

Michael Jackson’s promoter learned the hard way that sometimes fate overtakes events. Be prepared in case it happens to your client.

By  Coletta Kemper

He was the “King of Pop,” heading for a major comeback—and then in a heartbeat, it was over. Michael Jackson left behind mourning fans, devastated children, family and friends in shock and the cancellation of 50 live concerts at London’s O2 arena.

The exposure for an event of that magnitude is potentially huge. All 20,000 seats for all 50 concerts were sold out. As a result of Jackson’s death, the event promoter AEG Live may be on the hook for a lot of money. Some of the exposures AEG could face include ticket refunds, commitments to vendors and wages for event employees, among others. In all, news reports estimate losses up to $500 billion. Of that, $82 million was for tickets.

AEG has event coverage. How much and what it covers is only speculation at this point. To get the insurance, Jackson had to undergo a four-hour medical exam, which, according to the promoter, he passed with “flying colors.”

The insurance could cover some of AEG’s losses, but it may all hinge on how Jackson died. Rumor has it that the policy covers drug overdoses (it’s the entertainment world after all) but not death from natural causes. In any case, considering the strange circumstances surrounding his death, there’s likely a battle brewing between the insurers and AEG over the claim.

Murphy’s Law dictates that anything that can go wrong will go wrong. Most clients may not book big-time events, such as 50-concert tours, but they probably hold annual conferences, golf tournaments, fundraisers and the like. They may be the bread and butter of the organization.

So what do you do?

It’s the day of the big event, an annual conference of 2,500 people. Hotels and speakers have been booked, caterers hired and—long ago—contracts signed. The event planners have nailed down everything to the smallest detail and then the unexpected happens: A major storm rips through the area and crashes the power grid. Power won’t be restored for the three days the event is planned.

Now what? Got event insurance? This is where it kicks in.

A rule of thumb is that cancellation insurance covers perils that are beyond the control of the planner. Depending on the policy, event insurance can cover anything from a “runaway bride” to interruption or cancellation because of fire, hurricane, power outage, equipment loss, airline strike, terrorism, illness and death. Usually policies are written on a case-by-case basis, but they also can be written to cover a tour or on an annual basis—covering all scheduled events.

What it won’t cover is routine business problems, such as low attendance because of poor planning or marketing or simply lack of interest.

Whether it makes sense to buy cancellation insurance depends on the cost and size of the event and its relative importance to the organization’s finances. The cost depends on a number of variable factors, such as where and when the event is being held and the budget. Prices are higher in the winter than in the spring, summer or fall. And if the event is planned for the height of hurricane season in Miami or in an earthquake zone, then expect higher premiums.

Also, expect to pay considerably more if the event is in an area that is considered a high-risk terrorist target. Inside the U.S., those targets include New York, Washington and Los Angeles. Next on the list are national monuments and landmarks and other major metropolitan areas, such as Chicago, Boston and Las Vegas.

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