The cost of claims that could arise from the cancellation, postponement or curtailment of occasions like the Winter Olympics is enormous. Sarah Grant and Jason Smith ask whether insurers consider the risks involved before covering sporting events
In a year which will see the Winter Olympics in the US, the Fifa football World Cup finals in Japan and South Korea and the Commonwealth Games here in England, what are the risks involved in event organisation and the role which insurers may or may not wish to take?
Indeed, few will have missed the reports late last year that AXA Colonia, following the terrorist events of 11 September, had cancelled its contract with Fifa to provide insurance for the finals in June.
Many of the risks will be obvious, such as: claims for personal injury if temporary grandstands collapse; claims for sickness resulting from the consumption of food and/or drink freely served and/or purchased at the event.
However, the organiser may face claims from a number of other parties, particularly if the event is cancelled, postponed or curtailed. While this may be due to adverse weather conditions, the World Trade Centre attack has acutely focused the minds of organisers on the possibility of cancellation, postponement or curtailment due to terrorism.
Upon cancellation, not only will the organiser be under pressure to pay refunds to those persons who had bought tickets, but many other claims, often overlooked, may be brought by the event's commercial partners, sponsors, broadcasters and merchandise manufacturers.
Sponsors
Sponsors will have paid for the right to be officially associated with the event, usually to the exclusion of their market competitors. For large international events, a top-line sponsorship may cost tens of millions of pounds. The sponsor will hope its association with the event will increase awareness of its products or services or just its name generally.
Many will contract to place their trade names or logos on advertising boards in television camera view at the event, such as perimeter hoardings around a football pitch. If the event does not take place or is abandoned, they are likely to look for compensation for not receiving the brand exposure they otherwise would have received.
It is likely the event organiser will have appointed a host broadcaster to produce the basic visual feed of the event, which will then be used by other broadcasters around the world in their local territories. The host broadcaster may seek to recoup expenses incurred in setting up the facilities to produce such basic feed and to deliver the feed to other broadcasters. The host broadcaster may also have rights to broadcast the event in the country where the event is located. It, and the other broadcasters, will have sold advertising slots and broadcasting sponsorship to third parties. Claims may be brought for such lost income.
Profit losses
Manufacturers, appointed by the organiser to produce official merchandise and memorabilia, will seek to recoup their costs and, perhaps, loss of profit.
Increasingly today, organisers will appoint specialist companies to design, host and operate an internet site to promote and "cover" the event, allowing that party to engage in certain activities to help recoup its investment and make a profit. Such companies may bring their own claims.
The event organiser may, of course, attempt to "transfer" the risk to other parties. For example, the organiser may seek an indemnity from the suppliers of food and drink against claims resulting from consumption and require the supplier to have product liability insurance for such claims. The supplier, however, should refuse to indemnify against claims where the contamination results not from production or manufacture but from the "serving" of the food and/or drink.
In any event, in cases where the organiser places any element of the insurance burden upon others, the organiser should retain rights of approval over the nature and sufficiency of the cover, that its interest is noted on the policy and that no material changes may be made to the policy without the organiser's consent.
Clearly, an event without insurance could be a disaster waiting to happen.
Sarah Grant is a partner advising on all aspects of general defendant insurance litigation.
Jason Smith is a partner and specialist in all areas of sports law.
Both partners are with James Chapman & Co, Manchester
