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Most event planners lack liability coverage, despite exposures

Most event planners lack liability coverage, despite exposures

More than 50,000 event planners work in the United States, but the sector is not a significant source of business for errors and omissions insurers.

Among professional liability coverages, errors and omissions insurance for event planners probably is the “most innocuous,” said Letha Heaton, the Cherry Hill, N.J.-based vp-marketing at Admiral Insurance Co., a subsidiary of W.R. Berkley Corp.

Other underwriting and broker executives agree with that assessment of the coverage, for which rates are soft and capacity ample.

But it's not because event planners do not shoulder risk when retained to handle arrangements for functions such as concerts, political rallies, air shows and drag races, glitzy corporate affairs, and personal celebrations, such as weddings and anniversary parties.

Instead, it's because most event planners—typically single proprietors or small operations that arrange functions—do not buy professional liability coverage, according to market executives.

“E&O is not necessarily a primary cover that most planners purchase,” unlike other professionals, said Lori Shaw, the Charlotte, N.C.-based director-entertainment practice at Aon Risk Solutions, a unit of Aon Corp.

Event planners typically purchase E&O insurance, most often with $1 million of limits, only when their clients demand it or if an event includes an element, such as film clips, that creates trademark, copyright and likeness infringement risk, Ms. Shaw said.

Insurers also offer planners as little as $100,000 of limits, and many write up to $5 million of limits, market executives said. A few write up to $10 million of limits, they said.

While most planners don't buy E&O cover, the number of buyers has increased during the past decade, perhaps because there are more planners, said Inga Goddijn, a Deerfield, Ill.-based managing director at Markel Service Inc., a subsidiary of Markel Corp.

Many event planners do not buy any insurance—professional liability or general liability insurance, Admiral's Ms. Heaton said.

Even those who arrange star-studded concerts typically purchase only event cancellation coverage and general liability insurance, market executives said.

General liability insurance protects planners if an accident, such as a stage collapse, harms anyone in the audience, although a policy endorsement also would cover injuries to performers, said Brent Allen, CEO of Phoenix-based broker Allen Financial Insurance Group Inc.

E&O coverage would come into play in such an incident only if the event planner hired unlicensed contractors to construct the stage, Aon's Ms. Shaw said.

E&O coverage typically responds to a planner's mistake that could lead to breach-of-contract or non-performance claims. Such mistakes would include securing a venue for the wrong date, sending out mistake-riddled invitations, or failing to schedule an act or arrange services such as food catering, security or registration staff.

While insurers consider many events low-risk affairs, problems can befall even the most reputable planners, market executives said.

For example, if a wedding is somehow marred due to a planner's negligence, “emotional distress is a real issue,” Markel's Ms. Goddijn said.

A problem might not be due to a planner's own negligence but instead could be caused by a vendor that a planner retained. Admiral's Ms. Heaton recounted a dinner that a former employer had planned for 500 clients at an opera house. The company, which Ms. Heaton would not identify, retained a highly regarded event planner to handle all of the arrangements. But more than an hour into the event, only 10% of the guests had been served. The remainder then left, causing the company significant embarrassment, Ms. Heaton said.

The caterer returned its fee, but the refund was inconsequential compared with the reputational damage the company sustained, Ms. Heaton said. Suing the event planner for damages would have been pointless, because she was uninsured and did not have significant personal assets, Ms. Heaton said. But the company never used the planner again.

Still, “consultants like event planners are the easiest to write basic business liability for, as they theoretically do not have much exposure from the actual event,” Mr. Allen of Allen Financial said. Their E&O exposure “is a relatively low risk and easy to insure at a general minimum premium of $750.”

Other market experts said minimum premiums could be higher—around $1,250.

Market executives characterized the E&O market for event planners as competitive.

“In fact, it's downright too soft,” Markel's Ms. Goddijn said.

Rates have dropped “dramatically over the past five years with new companies, a soft market and more competition,” Mr. Allen said. The only price hardening he has seen has been “on the more extreme exposures.”

Aon's Ms. Shaw estimated that rates are down 10% from a year ago.

However, in negotiating rates and coverage, “a lot of it will depend on the formalized contracts (planners) have,” Ms. Shaw said. “You have to show the underwriter you're vetting contracts and not assuming responsibility for things you shouldn't be.”

Event planners typically purchase a 12-month E&O policy, which can be written on a claims-made or occurrence form and on admitted or non-admitted paper, market executives said.

Admitted insurers are licensed in the state in which a policy is sold, and those insurers must follow state insurance regulations on policy forms and rates. Their policyholders are protected by a state guaranty fund if the insurer fails. Nonadmitted insurers are free of rate and form regulation, but state guaranty funds do not protect their policyholders. An occurrence policy in effect at the time a covered a loss occurs—regardless when the loss is reported—covers that loss. A claims-made policy responds when a covered loss is reported within the policy period or, if agreed upon by the insurer, during a defined extended period.

But there are exceptions to 12-month policies, some of which could cause coverage problems, market executives said.

Because some planners purchase insurance that covers them only for the portion of the year they work, Ms. Goddijn said, with E&O insurance written on a claims-made basis, “you will always have some sort of gap in coverage” with that approach. The insurer that writes the planner's next E&O policy either will not offer a retroactive coverage date, or the retro coverage will not respond to claims filed during the period the planner was uninsured, she said.