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Posted On: Jan. 19, 1997 12:00 AM CST

WASHINGTON-While the events surrounding President Bill Clinton's second inauguration promise to be somewhat smaller in scope than those of his first induction into office, the various exhibits, parades, balls and assorted hoopla still leave no shortage of potential exposures.

In addition, since Mr. Clinton first took office in 1992, events like the Oklahoma City federal building bombing, this year's Olympic bombing in Atlanta and recent letter bomb incidents in Washington and elsewhere have increased inauguration planners' awareness of potential risks.

"We have hundreds of thousands of people coming to an event from all over and this creates risk," said Ken Stern, chief counsel to the Presidential Inaugural Committee.

The privately financed events organized by the committee cost an estimated $30 million and included today's inaugural parade and 14 inaugural balls scheduled for this evening.

The festivities also included: the weekend-long public celebration on the Mall called "An American Journey"; Saturday night's invitation-only Presidential Gala at the USAir Arena in Largo, Md.; a dress rehearsal for that gala Friday night; as well as a citywide fireworks display Saturday.

The entertainment division of Marsh & McLennan Cos. Inc. placed this year's package of inauguration insurance coverage.

"Next to the Olympics the inauguration is probably one of the biggest special events that we have in the United States," said A. LeConte Moore, senior vp and manager of M&M's entertainment division in New York.

"This year they are much more concerned because of the possibility of something happening at big spectator events because of the Olympic (bombing) situation," Mr. Moore said.

"The biggest exposure is general liability because there are a lot of people there," he said. "Then they rent a lot of automobiles

to ferry dignitaries and celebrities around and the auto exposure is also fairly substantial."

The inaugural committee purchases "substantial" umbrella liability coverage to cover any catastrophes, Mr. Moore said.

Cancellation insurance covers the committee in case of cancellation for any reason beyond its control, including bad weather. It also insures against cancellation in case a tragic event should make it inappropriate to go forward with the various celebratory events surrounding the actual inauguration.

The policy's language specifies that it will cover any events canceled because they are "inappropriate based on common standards."

The policy is unusual in that it allows the principal figure in the proceedings, namely the president, to determine whether the events should be canceled, Mr. Moore said.

"You can only get this kind of coverage done when you're talking about the president or the pope, dignitaries of such a stature that they're going to make the call on whether the event occurs or not," he said.

This year all the coverages for the inauguration are included in 10 policies, far fewer than the 25-odd policies that provided the coverage four years ago. Contributing to the consolidation was the fact that with one inaugural behind it, this year's committee is "more of an educated buyer," Mr. Moore said.

Also, M&M has become more experienced at placing coverage for the event, he said. "This is the fourth inauguration we have done, so we're getting better at it."

American International Entertainment Inc., a unit of American International Group Inc., wrote the majority of the inauguration coverages, while Chubb Wholesale, a division of Chubb Corp., wrote some ancillary coverages, Mr. Moore said.

Neither Mr. Moore nor the underwriters would disclose the limits of the coverage or premiums paid.

In addition to the liability coverages and cancellation insurance, the inaugural committee also purchased such policies as not-for-profit directors and officers coverage and workers comp coverage for the various workers associated with the event.

Most of the coverages are manuscripted, "and I think that's based on our experience," Mr. Moore said. "There's a lot of unusual things that come out of special events."

Those "unusual" aspects are one reason many insurers simply choose not to write special event liability coverages, Mr. Moore said.

Another concern for underwriters is that such events typically are organized by groups of people who have never worked together working on the event for the first time. During their "learning process" things can go wrong.

Also, from a business perspective, "You get your premiums only once, you don't have a renewal process, so to speak, and you don't have a chance to do loss control," Mr. Moore said.

"We're obviously handicapped by being a new organization and we obviously don't begin our business until late November or early December and then we put on a huge event," said Mr. Stern of the Presidential Inaugural Committee. "And that's an unusual situation from a lot of dimensions."

But, he noted, this year the group benefited from the fact that many on this year's committee, Mr. Stern included, worked on the first Clinton inauguration, as did Mr. Moore of M&M.

Alice Prine, a senior vp at M&M and special events liability expert, was a key player in placing the coverages, Mr. Moore said, negotiating the various liability contracts.

While the committee could have looked to London underwriters for the special coverage, "there is an unwritten rule that we want to keep it American," Mr. Moore said. Although the broker obtained quotes from Lloyd's of London, the committee chose not to place coverage there, he said, "because they want to keep it American because this is an American event."