Client Advisory: Coronavirus and Upcoming Events – Risk Management
Date: March 9, 2020
As you have undoubtedly seen on various association listserv and chatroom discussions, there are serious and growing concerns for those hosting meetings, conferences or other special events in the near future. As the news about the spread of the coronavirus (COVID-19) worsens almost every day, including incidents of attendees at large conferences testing positive, what is the right course of action for your association? Do you cancel your event in whatever time is left so that the association possibly can still take advantage of reduced early termination penalties offered by some hotels and conference centers and before your attendees incur travel costs? When do you initiate conversations about scaling back or rescheduling your meeting? As you get closer to the event, what assurances do you request about the contingency plans and preparations that are being made for your arrival to maximize the safety of your attendees and staff? What are the risks of waiting until the last minute to make the decision?
Although there are many issues to consider, it cannot be too early from a financial and legal perspective to pull out your meeting contracts and examine your attrition, termination, and force majeure clauses. You should also review with your legal counsel and broker what insurance you may have, ranging from coverage if your event is curtailed or cancelled, if a participant gets ill, or if you have cost of defense coverage if you are sued for breach of contract.
Preparations and Go/No Go Decisions
Health Advisories
The Centers for Disease Control and Prevention (CDC) has published guidance on how to prepare for what they refer to as “mass gatherings.” Key points to be addressed by meeting planners and venue sponsors with shared responsibilities include:- Review the existing emergency operations plans for your venues
- Address key prevention strategies in your emergency operations plan
- Communicate about COVID-19
- Put your emergency operations and communication plans into action
- Determine the need to postpone or cancel your events
The World Health Organization (WHO) has published a 9-page guide called “Key Planning Recommendations for Mass Gatherings in the Context of the Current COVID-19 Outbreak." This guide provides advice on making the decision to continue or cancel the event and, should the decision be to hold the event, recommendations on planning for any health related incidents that might occur at the event.
Both health agencies recommend establishing a relationship with the key public health agencies before the event. A member of the association’s staff should be designated as the primary point of contact for the health agencies. It is possible that the state or local government might declare a health emergency and you want to get that information as soon as possible. Having already established these relationships and communication channels should help you to receive timely information should there be a COVID-19 outbreak in the city where your event is being held.
Much of the responsibility for making sure that your attendees are safe falls on the venues themselves, such as having extra supplies on hand of items such as hand sanitizers, tissues and disposable facemasks for persons starting to have symptoms (at the venue’s expense). In addition, there should be a plan to isolate attendees or staff who get sick and for them to be helped by trained professionals and emergency responders in order to prevent your staff from being further exposed. A quick reading of the CDC and WHO documents cited above will help identify the many elements to be considered and reasonably expected as part of event planning.
Contracts
You should review all of your contracts for the event to determine what rights your association has to curtail or cancel the contracts. This will include contracts with the convention center, hotels, restaurants, other venues, and vendors (A/V, transportation, speakers/entertainment, conference management assistance, etc.). In addition to the usual contract termination provision, you should review the “force majeure” clause, which defines the rights and responsibilities of the parties in a situation where one or both parties are unable to perform their contractual obligations due to circumstances beyond their control. Force majeure clauses are intended to provide relief to one or both parties when performance under the contract is truly out of the party’s control. A typical force majeure clause will reference Acts of God (typically earthquakes, hurricanes, tornadoes, floods or other natural disasters), wars, insurrections, labor disputes, terrorist acts, or transportation shut downs – all events that are truly beyond the ability of either party to control.In a dispute situation, a hotel or convention center is unlikely to agree voluntarily that an epidemic or pandemic that results in reduced attendance due to the threat or fear of catching an illness will constitute a force majeure event. That is why associations have negotiated contract language whenever possible to include communicable diseases ever since the swine flu, SARS and Zika scares in years past. Without such protective language in your force majeure clause, the venue is likely to argue that only a governmental agency or executive such as a governor or president would need to impose restrictions which make it absolutely impossible or illegal to hold the event. Examples might include a prohibition on travel or a ban on large gatherings in a city or state in order for an epidemic or pandemic to constitute a force majeure. Associations also try to avoid the use of the word “impossible” in their force majeure clauses whenever they can, since it may always be possible to hold a smaller meeting. As a negotiating strategy, If the word “impossible” cannot be eliminated, it can be softened with contract language that that will provide relief if performance is impractical and cannot be performed as originally planned, or automatically allow for the association’s obligations to be reduced if some percentage of attendees cannot attend for the kinds of reasons stated above. Hopefully, your contract mentions communicable diseases and includes such protective language in your force majeure clause. Even without such language, an association may be able to seek protection under its force majeure clause given the magnitude of the evolving coronavirus situation.
Given the huge financial penalties that may apply, it is critically important to review the wording of your upcoming contracts with your lawyer along with possible insurance coverage as described below. Depending upon the contract wording, the penalty if any may be negotiable. Also, it is suggested that associations consider sending a letter to the venue requesting assurances that they are planning to meet all of the CDC and WHO recommendations. If they fail to do so, it can provide some leverage in your negotiations if you can argue that the failure of the venue to be prepared constitutes their breach of contract and one of the reasons you cancelled.
In lieu of cancelling the event altogether, you might be able reschedule the event at the same location at a later date with little or no penalty. Hotels do not want to lose your business. Rather than file a publicized breach of contract claim that they can possibly lose in this emergency situation, they likely may prefer to negotiate and keep your association as a long-term customer. This was the reaction of the hospitality industry following 9/11, which may repeat itself if the coronavirus spreads and forces numerous cancellations. You are in a stronger bargaining position if you have a multiyear contract with a site or vendor, or chain. If you are unable to reschedule your event, work with your conference planning company, if you have one, and the Convention and Visitors Bureau for the host city to negotiate the waiver or reduction of any penalties. If you are facing a breach of contract claim, check your D&O/Association Management insurance to see if you at least have cost of defense coverage as explained below.
If You Hold Your Event
After reviewing the information from CDC, WHO and any local health agencies, your association might decide to move forward with your event. In that case, you should consider taking reasonable precautions to ensure the health and safety of your meeting attendees. WHO recommends event planners consider measures to:- detect and monitor event-related COVID-19 disease;
- reduce the spread of the virus (which should be the responsibility of the venue to adopt special cleaning and hygiene procedures);
- manage and treat ill persons (which should also be the responsibility of the venue or emergency responders);
- disseminate public health messages to event attendees specific to COVID-19 disease.
Attendees who choose not to attend the event may ask for a full or partial refund. Depending upon the number of registrants in this position, your association might decide to offer a partial refund for attendees that may take advantage of online alternatives, or full or partial refunds or a credit on the 2021 conference registration fee as a good will measure.
Cancelled Events
If you make the difficult decision to cancel your event, this will present you with a host of legal issues – cancelled contracts, refunds of registration fees, and refunds of travel expenses for event registrants, exhibitors and association staff. One or more of your association’s insurance policies may cover some of the expenses related to the cancellation or provide a defense if you are sued.Event Cancellation Insurance
Most event cancellation policies limit the scope of coverage for communicable diseases, and some have a special endorsement that changes the standard coverage. Where provided, coverage is likely to apply both for a curtailment in the size or length as well as for cancellation of your meeting. In all cases, coverage will depend upon your specific facts and circumstances and needs to be carefully reviewed with your lawyer and insurance broker in light of your specific policy language. If you purchased event cancellation insurance after mid-January 2020 or are contemplating doing so in the future, the coronavirus will be excluded -- although coverage may be available by endorsement for future communicable diseases.A good event cancellation insurance policy should cover losses that your association incurs due to the unexpected curtailment in size or duration, or cancellation due to the coronavirus. Some policies may not cover losses due to reduced attendance if the event is held, or have limited coverage for room block guarantees, so that needs to be checked. Examples of policy coverage include: convention center usage fees; hotel room and food and beverage minimums, event attendee registration fees, speaker fees, association staff and board travel expenses, and any other contracted services for the event such as transportation, Audio Visual, security, event registration and other conference assistance, sign language interpreters, scooter rentals, entertainment, and other event related contracts. However, there are often limitations on these policies that must be carefully reviewed to determine exact coverage.
The time to review your event cancellation policy’s coverage is now. In addition to reviewing your force majeure, cancellation and attrition contract clauses as discussed above, you should be working with your lawyer and insurance broker to identify what constitutes a covered curtailment or cancellation under your policy, any deductible, and any other terms that must be met in order for coverage to be effective. Oftentimes, the language of the policies is ambiguous and subject to interpretation and will always depend upon your specific facts. Therefore, it is best to work with your lawyer and broker to plan ahead and best frame you claim before submitting it to the carrier. Our attorneys can provide assistance in working through these issues with your broker, including assisting with any claims that ultimately are presented to the insurance carrier.
It is also possible that your general liability policy might provide some coverage if a participant gets sick and makes a claim against the association. Also to be checked is your D&O/Association Management policy, which may cover the costs of defending a lawsuit that may be filed against you. Even if you eventually must settle or pay the whole amount claimed, you would not incur expensive defense and litigation costs with such coverage.
If your association has upcoming events for which you have not yet purchased event cancellation insurance, you might still be able to buy a policy, but it will exclude COVID-19 coverage, even if you purchase the coverage extension as noted above. As always, the policy wording and exclusions should be reviewed before purchasing.
Member/Attendee Issues
Registration Refunds - If your association cancels or reschedules the conference, your members and other attendees will likely expect a full refund of their registration fees. Your event cancellation policy may address this if you have coverage. If not, a decision will have to be made as to how refunds will be handled. If your event cancellation insurance covers the refunding of registration and other attendance fees, then you can process refunds in accordance with your association’s ability to pay directly or upon receipt of funds from your event cancellation insurance carrier. Many associations may want try to avoid this by substituting remote learning sessions or possibly providing a credit against future meeting registrations as mentioned above.Airfare Costs – It is rare, if not unheard of, for an event cancellation policy to cover out-of-pocket expenses of event attendees. However, if your association had an arrangement with an airline as the official airline of the event, there might be a provision in the contract that addresses cancellation of the event. It is possible that attendees would be able to either obtain a full refund or credit towards another flight. More likely, the airline’s own cancellation policies would be in effect. In the event that the airline itself cancels a flight, a refund or rebooking credit would likely be offered. If your event is to be held outside of the United States and the Centers for Disease Control or World Health Organization has issued a ban or warning on travel to the event host country, the airlines are more likely to be accommodating to passengers who cancel their flights.
As of right now, most major airlines are offering full refunds for purchase of new tickets in order to try and boost sales, but only for purchases in March so far. It will be important to see if these relaxed rules will be extended if the coronavirus emergency continues.
Hotel Costs – As noted above, your hotel contract for any “official” hotels for the event should have a cancellation or force majeure clause. If cancellation of the event by your association entitles hotel guests associated with the meeting to a full refund, then in those cases where attendees booked directly with the hotel, the hotel will be responsible for processing those refunds. For any hotels where meeting attendees selected their hotel, any cancellation or refund will be under that hotel’s cancellation policies. For your hotels, you should check and advise your attendees how far in advance they must cancel in order to avoid paying a penalty, which typically will be the first night’s deposit.
Exhibitor Issues
Exhibitors face the same situation as event attendees with respect to registration fees, airfare and hotel costs if the event is canceled. In addition, exhibitors might have incurred additional costs in shipping their exhibit booth and exhibit items to the event site, ordering custom signage or merchandise to distribute to attendees, etc. It is very unlikely that your association’s event cancellation insurance would cover these expenses. Instead, exhibitors’ own insurance policies should come into play. Exhibitors who did not arrange for insurance will have an expensive lesson in preparation.Review your exhibitor contract and confirm that the risk of loss due to cancellation is on the exhibitor and not the association. Your exhibitor contract should clearly state that the association bears no liability for cancellation of the event for circumstances beyond the association’s control (“force majeure” provision) or for the exhibitor’s decision not to attend the event.
Exhibitors should be encouraged to purchase event cancellation insurance or business interruption insurance of their own to cover their losses should an event be cancelled or the exhibitor or its employees decide not to attend the event.
Sponsor Issues
In the event that you have sponsors who are not exhibitors at your conference, they might be contacting you to find out if they can get a refund on their sponsorship fee. The question of refunds should the event be cancelled should be addressed in your sponsorship agreement. However, if the sponsorship agreement does not specify the obligations of the parties in the event of a cancellation, you will likely need to consider the benefits that the sponsor received and the amount that the sponsor paid for those benefits. Some benefits such as pre-event advertising in the association’s journal or newsletter might have already occurred, providing some benefit to the sponsor. It is possible that you will need to negotiate with the sponsors in order to reach agreement on a fair allocation of any prepaid sponsorship fees if the event is cancelled or curtailed.Employee Issues
Employee issues also have to be taken into consideration with regard to annual meetings and special conferences. The foremost concern should be protecting the welfare of your employees, as well as the public, while minimizing absenteeism and lost productivity which could cripple operations should your event take place. Therefore, it is important to identify essential versus non-essential personnel for such events. Doing this upfront can assist with determining staff necessary to attend an annual meeting, special conference, or other essential business function.If these personnel are exhibiting symptoms, encourage them to stay home until they are symptom free. This may require you to be flexible in application of your sick leave and attendance policies. If employees are required to use any form of paid leave or fear reprisal for failure to attend an event, they may attend conferences and events while exhibiting symptoms and put others at risk of infection. Thus, you should make it clear to employees that they will be provided additional paid leave, if possible, and their accrued, but unused leave will not be affected. Also, because of the potential for a pandemic, it may not be possible for employees to be seen by a doctor quickly or obtain a doctor’s note. Thus, these requirements in sick leave and attendance policies should be waived. While this may all seem costly in the short-term, it will be worth it in the long-term.
In addition, for employees whose attendance at events is necessary, have a plan of action if an employee exhibits symptoms while at your event. Consider having telehealth options available and a point of contact at the event to handle sick employee situations. Also, have a contingency plan in place for managing the event with reduced staff. While employees may already be taking on additional responsibilities due to reduced staff, you should let them know the possibility of them having further responsibility should an employee become sick at an event, in addition to how such situations will be handled.
Even though employees may be required to or willingly attend your event, they may still have heightened concerns about safety. To ease these concerns, consider providing your employees with personal protection kits such as hand sanitizer, gloves, emergency contact information, telehealth information, etc.
To ease anxiety and be prepared, communicate to employees the plan of action should an employee or participant get sick at the event. Make sure that the venue has an emergency preparedness plan in place for its trained personnel and emergency responders – not your staff -- to assist, quarantine or isolate any staff person or attendee who may develop symptoms in accordance with CDC, WHO and other guidelines.
In addition to advising your employees of their responsibility to follow infection control protocols, such as washing their hands, also inform your employees of your workers’ compensation coverage. There could be coverage for a COVID-19 illness contacted while at a work event or conference. The ultimate determination as to whether such an event will be covered by workers’ compensation insurance will depend on the specific language of the policy. Thus, you should review your workers’ compensation policy in advance of your event with your insurance broker to determine if coverage exists should an employee travel to a city where there is an outbreak of COVID-19 and become ill.
Conclusion
No matter when your next event is scheduled, it is advisable to review your contracts, attendee and exhibitor registration information/agreements, and insurance policies now so that you are informed and in a position to quickly make decisions about whether to hold or cancel your event. In making that decision, you will be balancing your association’s financial considerations against the welfare of attendees, exhibitors, staff and others. If you have issues with your contracts and insurance coverage gaps, then take the time to be better prepared to face the next coronavirus.The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.