The non-events

The financial shockwaves from 11 September have resounded into insurance for sporting events. Jason Smith reports on how organisers are having to bone up on their cover

“The world has changed considerably and new risks need to be taken into account and that is why we wrote to FIFA cancelling the insurance.” So went the statement reportedly released by AXA Colonia following the cancellation of its contract with FIFA to provide insurance for the 2002 World Cup Finals in Japan and South Korea in 2002 following the events of 11 September.
While insurance relating to cancellation, postponement or curtailment of events has always been a concern for event organisers, never has there been such focus on the threat of terrorist attack. Indeed, following 11 September, there was a widespread postponement of events, and not just in the US. UEFA – the governing body for football in Europe – postponed all matches taking place in its premier club tournament the Champions League on 12 September. Similarly, golf's Ryder Cup, the traditional showdown between the US and Europe which was due to take place in the UK on 28-30 September, was postponed for 12 months after a number of US players questioned both security and the appropriateness of playing in the circumstances.
The concern is that sporting events, particularly high-profile international events, will be prime targets for terrorists. Indeed, in early October the organisers of the forthcoming Winter Olympics in Salt Lake City sought a further $40m (£28.4m) from the US government for additional security.
So what are the risks and potential liabilities for organisers if forced to abandon, postpone or curtail their events? Whether they are numerous or not will depend, to a degree, upon whether they are forced to actually cancel, postpone or curtail.
Broadcasting is one area where the organiser may face claims. The host broadcaster – namely that broadcaster appointed to produce the basic visual or audio-visual feed of the event – may seek to recoup the costs incurred up to the date of the decision. The host broadcaster may also have rights to broadcast the event in the territory where the event is located and will have sold to third parties advertising slots and broadcast sponsorship surrounding the event broadcasts, where the event is particularly high profile and at premium rates. Finally, if the broadcaster was granted the right to charge for receiving its broadcasts, it may seek to recover such lost income. The organiser may face similar advertising, broadcast sponsorship and subscription claims from other broadcasters who had contracts to broadcast in their local territories.
An organiser may also receive claims from sponsors. In some cases, they will have paid vast sums for the right to be officially associated with the event, usually to the exclusion of their competitors. They will be hoping their association with the event will develop and enhance the awareness of their brands. Extensive and high-quality television coverage will therefore be essential, particularly if they have purchased the right to display the trade names or logos of their brands, products or services on advertising boards in the angle of the main television cameras, for example perimeter hoardings in certain areas around a football pitch. They may even be entitled to 'virtual advertising' rights, such as the right for any such logo to be incorporated into the basic feed, so that when the broadcast is delivered to its audience its logo appears, for example, in the middle of the pitch. Sponsors are likely to look for compensation for not receiving the brand exposure they would otherwise have received.

“Many governing bodies thought it appropriate to postpone events in Europe as a sign of respect to the victims”

There are many other areas where organisers may be exposed: third parties who have purchased the right to manufacture official merchandise that they may no longer be able to sell, even when the event is only postponed to the following year (it is likely that, for large international events, much of the merchandise will incorporate the year in which the event was due to take place); providing refunds to purchasers of tickets and corporate hospitality; paying appearance fees to major celebrities; and the many contracts and costs relating to the event logistics such as the provision of security and temporary grandstands.
Clearly, insurance should be obtained to cover all identified risks. However, as the postponement of numerous events after 11 September showed, consideration must also be given to the circumstances in which a valid claim may be made.
The attacks were in New York, yet many governing bodies thought it appropriate to postpone events in Europe and, arguably, not just from fear of terrorist attacks upon their own events but as a sign of respect to the victims. Organisers may need to ensure that they can postpone and/or cancel for reasons other than that of a terrorist threat or an actual attack on their own events.
Organisers must also not forget many other inherent risks, even when the event is not cancelled, postponed or curtailed: if major stars withdraw, broadcasters and sponsors may bring claims similar to those already highlighted, and the number of tickets sold may be substantially lower than anticipated and budgeted for; the host broadcaster may experience technical problems resulting in reduced periods of broadcasting or lower quality than anticipated (for which sponsors may have sought contractual assurances such as paying out contingent prizes – for example, £1m to a golfer for a hole in one on a nominated hole).
There is also potential liability for personal injury claims brought by spectators and participants, and perhaps even death claims brought by their estates. Take football and Hillsborough, motor racing and Senna – the safety precautions taken in the circumstances will be of paramount importance in determining liability. Yet solutions are not always easy. In the recent Network Q Rally of Great Britain, a car driven by Spain's Carlos Sainz ploughed into a group of spectators on a bend, injuring 13 of them. Traditionally, stages of the rally take place in open forest, with spectators congregating on bends rather than on straights, as it is far more exciting to see the drivers take such bends at high speed and they are far more likely to see any 'incidents'. However, it is those incidents that carry the greatest risk, as shown by the rally incident.
Providing products and services also gives rise to potential claims from spectators – for example, if injured while being transported in courtesy vehicles from designated parking areas to the event location or if a temporary grandstand collapses, or sickness resulting from the consumption of food purchased at the event.
The organiser does not, however, have to bear the full insurance burden. Laws permitting, organisers could pass risks contractually and require appropriate insurance cover. For example, organisers could require host broadcasters to insure against those risks associated with the production of the basic feed, and product and service providers to have appropriate product liability insurance. In any such cases, the organiser should ensure that it retains approval over the nature and sufficiency of the cover, that its interests (and those of any other interested parties such as sponsors) are noted on the policy and that there may be no material changes to the policy without the organiser's consent.
Alternatively, it may be more economic for the organiser to buy a collective package and ensure that elements of its cost are recouped from appropriate parties. In any event, organisers will ignore risk and insurance at their peril.
Jason Smith, a sports rights specialist and a partner at James Chapman & Co, advised FIFA on the documentation sent to the bidding nations for the 2006 World Cup Finals