Cover Your Assets

Those with any connection to live entertainment are aware of risks involved – risks that were punctuated by a summer of deadly and costly accidents.

James Chippendale, executive VP at Doodson Insurance Brokerage, spoke with Pollstar about how promoters can protect themselves from such financial disasters.

Not to put too fine a point on it, but Chippendale noted that, eight years after the West Warwick, R.I., fire that killed 100 concertgoers, and after the Indiana stage collapse, for some not much has changed. “Many still operate in a loosy-goosy manner that leaves them exposed,” Chippendale said.

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Whenever insurance is discussed at Pollstar Live!, people talk about cutting costs wherever they can.

Well, it’s not just cost. It’s cutting knowledge and time. The effort to have your suppliers sign contracts and provide insurance takes time and effort and nobody wants to do it or thinks about doing it until you have a situation like Indiana. The question is, what happens now? And some promoters and festivals don’t know what happens now.

So what happens now?

Well, from a safety perspective there needs to be some universal standards but the key is to undertake proper risk assessments, working closely with risk and insurance advisers.

Then what are the things to think about if you’re producing a concert or festival?

Contracts with suppliers, vendors and artists have mutual indemnification clauses and event cancellation insurance.

You want to work with a quality company but it all comes down to the contracts you’re signing. A lot of times you don’t know what you’re signing. Adequately contract with your suppliers and vendors – all the way down to the little food vendors.

And make sure all the entities that come on site have adequate insurance limits, that you’re named on their insurance policies and, on the contracts, there is an indemnification clause that protects you should that entity do something wrong. In the example of Indiana, if the promoter, let’s say, had a contract signed with all of the staging elements that named additional insured on their policy with adequate liability limits, the promoter’s exposure is almost nil.

Everyone complains about “additional insured.”

It’s so funny because nobody really knows what the terminology means. The words “additional insured” doesn’t mean what 90 percent of the world thinks it means. It doesn’t mean you’re picking up their liabilities. That’s not what it means at all. It just means you’re protected should they do something in your name. And if you do something and they get named in your lawsuit, they have protection under your policy. But it absolutely, positively does not extend any insurance coverage or pick up any additional exposure for that company. And that is a huge misconception in the industry.

The exact language of “additional insured” means only out of the operations and negligence of the named insured. So, let’s say the staging company in Indiana named the promoter as additional insured, and the promoter is named in a lawsuit. If the staging company is deemed to be at fault, the promoter would then have coverage for defense under the staging company’s policy. Now let’s say the promoter did something wrong to cause the stage to collapse. They would not have coverage under the staging company’s policy because it wasn’t out of the operation of the person who named them. It’s a little confusing but you’re only covered for what you do negligent, or what they do negligent.

Do you ever get the impression then that there isn’t a full understanding of all this in the concert business?

Absolutely, positively. Every day we struggle with what “additional insured” means. And an indemnification really does.

Yes, it’s a challenge and it’s across the board. I’m not talking about just one or two. I’m talking about the majority of the people in the concert business don’t really understand it. And it’s weird because they don’t really care until something goes wrong.

That’s what’s frustrating to us. We’ll go in and tell people all this and they won’t take, say, event cancellation coverage. Then all of a sudden it happens and it’s, “Oh shit! You mean this could have covered that?” Yes, that’s what we told you that does. But they really don’t want to deal with it.

So you can say C3, which promotes Austin City Limits and Lollapalooza, does it right?

ACL does it right, Lollapalooza does it right. But it’s been a process for them to get to this place but they do an incredibly good job in making sure their asset – Lollapalooza, the brand – and people who go are as protected as possible.

They take risk management contracting, mutual indemnification and insurance certificates very seriously because they want to make sure, first, that the worst never happens but, if it does, if that stage collapses and 20 people die that the brand Lollapalooza doesn’t have to file bankruptcy. We have worked hard with them on this over the years and they’ve got it down pretty well right now. It’s just getting promoters to take it seriously up front.

Do you ever get clients that just say, “Give me something to sign that will guarantee I’m whole at the end of this event”?

Yeah, we get that. And then we come to them and say, “OK, if you want to make sure every single liability, piece of equipment and cancellation is covered, then this is what it’s going to cost.”

And it’s, like, “What? You’ve got to be kidding me!” And I’ll say, “There are other ways of doing it. There are other ways of indemnifying yourself and saving money by just doing contractual things and additional insured things, and push-backs to your vendors and suppliers. You don’t have to cover all the equipment.”

I’ll tell you one of the biggest things that’s done across the board is promoters and festival organizers are signing contracts that say they’re responsible for every piece of equipment that’s on site at all times, for anything that happens.

And these guys don’t have those kinds of limits to protect that. So they’re out there with two, three, $5 million in equipment on the site that, if it got completely destroyed, the promoter would have no idea that they’re on the hook for it. So, what we’ve done with our clients is, in the contract, make it very clear the promoter’s not responsible for the equipment. It’s amazing to me, and I’ve been doing this for 15 years and thousands of events, that the vast majority are out there signing contracts that they really don’t understand – whether it’s an artist contract or a vendor contract.

From small promoters to large ones, do you know of any that have an employee dedicated to understanding all of this?

No. Usually not. Even biggest in the country rely on hiring a company like ours and some of the other firms out there as their experts. The person in that office that we usually work with is either their in-house counsel or their controller. And their knowledge is somewhat limited because most companies cannot afford a full-time on-staff risk manager.

We do a lot besides just insurance – we help them with the indemnification wording, we help them obtain all the certificates, we come in on site and work with them as far as other safety issues and bring in safety control people. We had an hour meeting just last week with a fairly good-sized promoter-slash-festival and went over Insurance 101 and these guys hadn’t a clue. And they had been doing it a long time.

They were so busy building their business they were signing contracts that say they’re liable for stuff they don’t have, for millions of dollars of limits they don’t have proper insurance coverage for. And nobody really cares until your business is gone.

Granted, force majeure covers a lot, but is it possible to tell a client, “Look, even if an alien spaceship crashes on your festival grounds, we’ve got you covered”?

In theory yes. It is much harder to insure things that are more likely to happen!

The insurers we work with will insure most things if they can – as long as the risk is well managed. The key is tailoring insurance specifically to the risk and to things that can adversely affect the festival.

Understand that up front. And if you take no more than a couple hours with a seasoned broker and take just as little as an hour of uninterrupted time to learn all the different things that could possibly happen at your event and all the exposures you have, you’ve got it. It’s not like you have to take a month-long course.

Example: The Texas wildfires were outside of Austin. I got a call from C3 a week before the ACL festival: “What if those shift and start heading toward Austin?” Guess what: you’re covered. One phone call, no ink.

What are some exclusions?

You’ve got carriers out there that exclude everything and you’re just buying a piece of paper to show somebody. But every time there’s an outbreak – let’s say SARS – the next year you’re going to see a SARS exclusion on an event cancellation policy. Maybe we’ll exclude any amusement device.

Amusement device? Such as the Tesla coil at Coachella?

Sure, could be. It could also be mechanical bulls or rock climbing walls. But you’re hiring people to man and operate those. So if you say, “Great, that’s OK if it’s excluded under my policy” because I have confidence that Joe’s Rockclimbing has their own insurance.

So that just means to follow the same protocol as with vendors – make sure they’re additional insured.

Exactly. Because if something happens on the climbing wall, somebody falls off and dies, and Joe’s Rockclimbing doesn’t have insurance? Guess what: the festival organizer’s going to be, first off, named in that lawsuit.

And if the vendor doesn’t have insurance the festival is going to pick it up under their policy. But if the festival has a rock climbing exclusion, they won’t have any insurance. And if the wall guy is under additional insured, any defense cost the promoter would have incurred is now covered under the rock wall’s insurance.

For the first time in my life I may have figured out something about insurance.

And we’ve talked, what, 30 minutes? And you’re understanding it!