Summary

• Practitioners must understand the challenges event cancellation policyholders face, including coverage exclusions.
• Frequently disputed coverage issues include whether certain exclusions apply, what “losses” will be covered, and whether a cause of loss is beyond the policyholder’s control.
• Risks like terrorism, war, pandemics, and extreme weather are becoming more prominent.
• Issues such as what losses to insure and whether a loss is beyond the policyholder’s control will continue to arise. 

In today’s unpredictable world, the need for event cancellation insurance has never been more evident. Whether it is a high-profile concert by a global superstar like Taylor Swift or an international sporting event like the Olympics, the potential for disruption looms large. Terrorism and war, adverse weather events, and pandemics contribute to the growing risks faced by event organizers, artists, and venues.

Despite the sparse case law addressing coverage issues in event cancellation policies, certain issues have been teased out to some degree. Frequently disputed coverage issues include whether certain exclusions apply, including the communicable disease exclusion and war exclusion; what “losses” (e.g., expenses, profits) will be covered; and whether a cause of loss is beyond the policyholder’s control.

Become Familiar with Event Cancellation Insurance Issues

Event cancellation insurance is a specialized type of coverage designed to protect against financial losses when an event is canceled, postponed, or relocated¹ due to unforeseen circumstances beyond the policyholder’s control. ² 

It can cover a wide array of risks depending on the type of policy. Many policies are written on an “all-risk” basis, whereas others are issued on a specified perils basis. Depending on the terms of the policy, the insurance can protect policyholders from unforeseeable circumstances, such as inclement weather, earthquakes, power failures, non-appearances by performers, and terrorism. But a policy issued on a specified perils basis, such as a virtual event cancellation policy, will offer more limited coverage based on specified causes, such as the malfunction of necessary facilities (i.e., equipment vital for the event to proceed virtually) or the non-appearance of a key speaker. Or a policy may specify coverage only where the cause is the direct result of terrorism or loss arising out of adverse weather events such as “Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation.”

But one thing is evident: As global events become more complex and fraught with potential disruptions, the importance for insurance coverage practitioners to be familiar with the legal issues pertaining to this coverage has become increasingly clear.

Increased Threats of Event Disruption Implicate Coverage Issues

There are many circumstances that could affect proceeding with an event. More recently, the world has faced greater obstacles introduced by terrorism and war, adverse weather events, and a pandemic, all causing event disruptions and each potentially implicating exclusions to coverage.

Terrorism and War

Application of the war exclusion. The cancellation of Taylor Swift’s concerts in Austria due to terrorist threats highlights the dangers that high-profile events face. ³ 

Particularly after the attacks on September 11, 2001, event cancellation policies commonly include exclusions for terrorist acts and war-related events.

The war exclusion generally bars coverage for damages caused by war or “warlike” actions. The term “war” “has been defined almost always as the employment of force between governments or entities essentially like governments, at least de facto.” ⁴ 

Two of the leading cases addressing the war exclusion in an insurance policy are Pan American World Airways, Inc. v. Aetna Casualty & Surety Co., under an aviation all-risk insurance policy, and Holiday Inns Inc. v. Aetna Insurance Co., under an all-risk property policy. In both Pan Am and Holiday Inns, the courts refused to treat violent actions by Palestinian terrorist organizations targeting civilians as falling within the war exclusion.

Consistent with these prior cases, the Ninth Circuit held a few years ago, in Universal Cable Products, LLC v. Atlantic Specialty Insurance Co., that the war exclusion in a television production insurance policy did not apply after a Hamas rocket attack forced NBC Universal to relocate a show production in Jerusalem during the 2014 Israeli-Palestinian conflict. ⁵ 

The war exclusion at issue excluded “undeclared or civil war,” “insurrection, rebellion, revolution, [and] usurped power,” and “[w]arlike action by a military force.” ⁶ 

The court recognized that the war exclusion had achieved a specialized meaning ascribed to it when used in the insurance context, ⁷ 

and the court found that war “refers to and includes only hostilities carried on by entities that constitute governments at least de facto in character.” ⁸ 

It concluded that Hamas was neither a de jure nor de facto sovereign, so its conduct could not be construed as “war” in the context of the war exclusion. ⁹ 

Much like Pan Am and Holiday Inns, this case demonstrates the need to look at the nature of the conflict and status of the party on each side to assess whether the exclusion could act as a bar to coverage.

In 2023, a New Jersey Superior Court Appellate Division panel examined the war exclusion in a property policy. ¹⁰ 

In Merck, the court rejected the insurers’ attempts to invoke an exclusion for “hostile or warlike action” to avoid covering losses claimed by Merck & Co. resulting from the 2017 NotPetya malware cyberattack. 11 

The malware was delivered to Merck’s computers through accounting software developed by a Ukrainian company, spreading to over 40,000 Merck computers. ¹² 

The decision was the first ruling on whether a traditional war exclusion bars coverage for a cyberattack.

The war exclusion at issue in Merck specifically excluded the following:

Loss or damage caused by hostile or warlike action in time of peace or war, including action in hindering, combating, or defending against an actual, impending, or expected attack: (a) by any government or sovereign power (de jure or de facto) or by any authority maintaining or using military, naval, or air forces; (b) or by military, naval, or air forces; (c) or by an agent of such government, power, authority, or forces[.] ¹³ 

The court, taking a plain language view of the exclusion, agreed with the trial court that the exclusion would not apply to a cyberattack on a non-military company, even if it came from a government or sovereign. ¹⁴ 

Further, despite the rise in cyberattacks before the policies were issued, the insurers used standard war exclusion language, which Merck had the right to expect applied only to traditional warfare. ¹⁵ 

The court noted that past cases show the exclusion relates to actions clearly tied to war or military objectives. ¹⁶ 

Based on this, the court concluded that a cyberattack was not the type of act contemplated by the exclusion. ¹⁷ 

Similar to Merck, a case in Illinois state court, Mondelez International Inc. v. Zurich American Insurance Co., involved an insurer’s attempt to invoke a “war exclusion” under a property policy as a basis for not paying losses suffered by snack food giant Mondelez International due to the same incident in Merck, the 2017 NotPetya attack. The parties ultimately settled after nearly four years of litigation and weeks of trial. The settlement decision reflected and reinforced the court’s ruling in Merck that the war exclusion did not apply to the cyberattack.

The war exclusion in event cancellation policies. Pan Am, Holiday Inns, Universal Studios, Merck, and Mondelez provide valuable insight into how courts may interpret an insurer’s attempt to invoke the war exclusion in an event cancellation policy. Given recent developments in the law, particularly regarding cyberattacks, insurers have sought to broaden the scope of the exclusion in their policies. As a result, it is crucial for practitioners to stay informed about ongoing litigation concerning the application of the war exclusion.

For example, some event cancellation policies exclude the following:

a. War, including undeclared or civil war; b. Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or c. Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.

This exclusion would cover actions nearly identical to those excluded in the television production policy reviewed by the Ninth Circuit in Universal, including “undeclared or civil war”; “insurrection, rebellion, revolution, [and] usurped power”; and “[w]arlike action by a military force.”

As another example, the war exclusion in other event cancellation policies excludes

loss or damage directly or indirectly occasioned by, happening through or in consequence of war, invasion, act of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation or nationalization or requisition or destruction of or damage to property by or under the order of any government or public or local authority.

This exclusion bars coverage for war, hostilities, civil war, rebellion, revolution, insurrection, military action, and usurped power. Given the similarities to the war exclusion examined by the Ninth Circuit in Universal, it is likely that a court would apply the same reasoning and rule that “war” in event cancellation policies refers only to hostilities conducted by entities that are at least de facto governments as well.

It is likely that a court would find the war exclusions in event cancellation policies inapplicable to a cyberattack. Applying the reasoning from Merck, policyholders would have reasonably expected these exclusions to apply to traditional forms of warfare, given their alignment with standard war exclusion language. In addition, both exclusions reference hostile or warlike actions and terms like “military force,” which in Merck were interpreted as relating to actions clearly connected to war or military objectives. The specific language is crucial, but for war exclusions in event cancellation policies with similar wording, the long-standing rulings in Pan Am, Holiday Inns, and Merck should apply.

The terrorism exclusion in event cancellation policies. Recent developments in the law regarding the war exclusion, especially in the context of cyberattacks, have led insurers to expand this exclusion in their policies. At the same time, insurers are also increasingly adding terrorism exclusions. These exclusions may cover “any act of terrorism and/or the threat or fear of terrorism, whether actual or perceived,” regardless of other contributing factors. It is crucial to carefully review policy language to understand whether coverage applies only when a terrorist attack occurs or whether it also covers threats of terrorism. In the latter case, it is essential to thoroughly document the threat and ensure it is deemed reasonable to avoid challenges that the threat was a hoax and the event should have proceeded.

Weather-Related Disruptions

Weather events have significantly altered the risk landscape for event organizers, particularly in relation to outdoor events. Over the years, sports and entertainment events have been affected by severe weather, ranging from hurricanes and snowstorms to extreme heat and flooding. Recently, Hurricane Milton in Florida caused the cancellation of preseason professional basketball games and postponed or canceled “countless” college and high school sporting events. ¹⁸ 

The entertainment industry has been affected too. In 2022 and 2023 alone, there were at least 21 music festival cancellations in the United States as a result of extreme weather. ¹⁹ 

Although event cancellation insurance can offer protection against the risks of weather-induced disruptions, some policies may limit or altogether exclude coverage for “adverse weather.” Thus, it is vital for a practitioner to be wary of weather-related issues when advising on procuring event cancellation coverage. An “adverse weather” exclusion may not be problematic for indoor events in a location with historically good weather. But for outdoor events, particularly in locations with devastating seasonal weather, the exclusion can be problematic.

The particular language will also be important. The exclusion may limit only certain types of weather, or it may exclude only weather events that are so extreme that they prevent attendees from reaching the event. Another concern practitioners should be on the lookout for is the duration of the policy. With many events extending beyond the main event itself and including pre- and post-events (pre-game concerts, etc.), it is important to ensure that the policy period covers the timing of such events.

Pandemics

In addition to its devastating health impacts on so many, COVID-19 also led to the cancellation, postponement, or relocation of events. While there were valid reasons for policyholders to seek coverage under their business interruption policies, event cancellation insurance—if they had it—seemed like a more straightforward path to coverage because it did not require proving physical damage. However, policyholders have faced challenges when attempting to claim coverage under their event cancellation policies.

The Ninth Circuit examined whether event cancellation coverage could apply to COVID-19-related losses in a case involving Metallica. ²⁰ 

In September 2019, the band purchased a cancellation, abandonment, and non-appearance policy with a communicable disease exclusion. ²¹ 

In April 2020, as the band prepared for six shows in Argentina, Brazil, and Chile, the COVID-19 pandemic and related government shutdowns forced them to cancel when crowd and travel restrictions went into effect. ²² 

The band filed a lawsuit seeking coverage, but the court granted the insurer’s motion for summary judgment. The trial court ruled that the communicable disease exclusion barred coverage because it excluded losses “directly or indirectly arising out of, contributed to by, or resulting from any communicable disease or fear or threat thereof.” ²³ 

The policy defined “communicable disease” as “any disease capable of being transmitted from an infected person or species to a susceptible host, either directly or indirectly.” The court determined that the exclusion’s exceptions did not apply in this case.

Metallica appealed, arguing the trial court wrongly equated “disease” with “virus.” ²⁴ 

The band pointed out that the World Health Organization distinguishes between SARS-CoV-2 (the virus) and COVID-19 (the disease). ²⁵ 

The Ninth Circuit upheld the trial court’s decision, finding that the policy’s definition of “communicable disease” encompasses the pathogen causing the disease. ²⁶ 

The court also ruled that COVID-19 was the proximate cause of Metallica’s loss, given that government restrictions were imposed in response to the spread of SARS-CoV-2. ²⁷ 

In response to COVID-19, insurers expanded their communicable disease exclusions, but future health crises may not fit these exclusions. In such cases, careful examination of the exclusion’s wording will be essential.

What Losses Are Covered?

Covered losses typically include out-of-pocket expenses and lost profits or revenues. Canceling, rescheduling, or relocating an event often incurs significant costs, such as venue rent, non-refundable deposits, production expenses, and contractual obligations to vendors and sponsors. In addition, there may be coverage for lost revenue, including ticket sales, concessions, and other event-related income.

A policyholder can typically choose which losses to insure. Some policies use “ascertained net loss” to determine recovery, which can vary in definition, but in one policy, it is defined as follows:

(a) Expenses which have been irrevocably expended in connection with the insured Event(s), less any savings the Assured is able to effect to mitigate such loss, and (b) Profit (where insured and stated in the Schedule) which the Assured can satisfactorily prove would have been earned had the insured Event(s) taken place. ²⁸ 

Under this definition, loss would typically cover non-mitigated expenses and any insured profit (presuming it was stated in the schedule). Alternatively, a policyholder, such as a nonprofit, may choose not to cover lost profits for an event where no admission fees were charged.

When applying for coverage, a policyholder must carefully consider what constitutes “loss,” as defined by the policy. For example, a dispute arose over lost profits under an event cancellation policy purchased for a marching band competition by Defeat The Beat, Inc., which hosted annual band competitions. ²⁹ 

After light rain turned into a storm with lightning and thunder, the event was interrupted for 35 minutes, causing a 35 percent drop in expected attendance. ³⁰ 

Defeat The Beat claimed lost profits from attendee income, program sales, T-shirt sales, and CD/DVD sales as part of its damages. ³¹ 

Defeat The Beat’s event cancellation policy covered ascertained net loss, defined to include profit when specified in the schedule. ³² 

While the policy’s schedule set a limit of $350,000 for indemnity excluding profit, the limit for indemnity including profit was left blank. ³³ 

This omission proved fatal to Defeat The Beat’s claim for lost profits, as the policy covered profit only if explicitly stated in the schedule, which it was not. ³⁴ 

This case highlights the importance of clearly defining losses in the policy to avoid disputes over coverage. Lost profits are not automatically covered under event cancellation insurance. Policyholders seeking to protect potential earnings from a canceled event should negotiate for explicit lost profits coverage or additional policies addressing this risk.

The Show Must Go On . . . Or Must It?

Event cancellation policies generally do not cover losses caused by expected events or those within the policyholder’s control, as these policies are meant to cover unforeseen causes. ³⁵ 

A couple of decisions provide insight into a key factor in coverage availability: whether the cause of cancellation was beyond the policyholder’s control.

In HDMG Entertainment, LLC v. Certain Underwriters at Lloyd’s of London Subscribing to Policy No. L009082, the court examined whether the cause of an event cancellation was within a policyholder’s control. At issue was an event cancellation policy for the Swamp Fox Biker Bash; the insurance application was submitted in February for the event planned in May. ³⁶ 

The policy applied only if (1) the loss resulted from an unexpected cause beyond the control of the policyholder and any contracted party performing a critical function for the successful fulfillment of the event; and (2) the loss was not the direct or indirect result of any excluded cause. ³⁷ 

A communications system was essential for the Bash, and in January the policyholder hired a contractor to install one by March 14. ³⁸ 

As the deadline approached, the contractor delayed the installation until late April, just 10 days before the event. ³⁹ 

Ultimately, the contractor stated the system would not be ready until after the Bash, forcing its cancellation. ⁴⁰ 

The insurer denied the policyholder’s claim and sought to rescind the policy. ⁴¹ 

In its summary judgment motion, the insurer argued coverage was not triggered because the loss was expected, within the policyholder’s control, and caused by a contracted party. ⁴² 

It argued that the policyholder knowingly chose a venue without a communications system, was aware of installation needs when applying for insurance, hired the contractor directly, and failed to seek alternatives when delays occurred. ⁴³ 

The court denied the insurer’s summary judgment motion, citing several factual issues, including whether the policyholder’s choice of a venue without a communications system made the loss expected and within its control, and the extent of the policyholder’s control over the contractor. ⁴⁴ 

This case highlights that determining whether a loss is beyond a policyholder’s control is fact-intensive. It also emphasizes the importance of carefully selecting contractors, documenting communications, and understanding potential delays.

In Information Management Network v. Certain Underwriters at Lloyd’s, a conference planner canceled an October 2001 conference in the Bahamas, with more than 1,000 planned participants, after the September 11 attacks led to corporate travel restrictions and safety concerns, causing participants to withdraw. ⁴⁵ 

Its event cancellation policy covered losses from events that were “necessarily” canceled or postponed. ⁴⁶

The insurer argued cancellation was not necessary because of the travel restrictions. ⁴⁷ 

 Because the term “necessarily” was not defined in the policy, the court used a dictionary definition of “necessarily,” which included “inevitably”—meaning “impossible to avoid or prevent.” ⁴⁸ 

 Despite more than 200 participant cancellations due to corporate travel restrictions, the court concluded that the event cancellation did not meet the policy’s definition. It was “neither inevitable nor impossible to avoid” because there were no government-imposed travel restrictions to the Bahamas and the venue was available. The court therefore found no coverage. ⁴⁹ 

As these cases show, whether a cancellation is due to causes beyond the policyholder’s control can be contentious. The definition of “beyond control” can be broad, as in HDMG Entertainment, or narrow, as in Information Management Network. Logistical challenges may be seen as manageable risks within the policyholder’s control and thus not covered. Furthermore, as HDMG Entertainment highlights, this determination is fact-specific and depends on the circumstances and the policy language.

Conclusion

Risks like terrorism, war, pandemics, and extreme weather are becoming more prominent. Practitioners must understand the challenges event cancellation policyholders face, including coverage exclusions. Issues such as what losses to insure and whether a loss is beyond the policyholder’s control will continue to arise. When addressing the legal issues tied to event cancellation coverage, don’t just “shake it off.” Instead, ensure that the policyholder is properly protected and advised so that the policyholder can weather the storm when challenges arise—both literally and figuratively.

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©2024. Published by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

1. See, e.g., HDMG Entm’t, LLC v. Certain Underwriters at Lloyd’s of London Subscribing to Policy No. L009082, 355 F. Supp. 3d 373, 380 (D.S.C. 2018) (quoting event cancellation policy that agreed to indemnify a policyholder for “loss as a direct result of cancellation, abandonment, curtailment, postponement, or relocation of the insured event” (bold in original)).

2. Most event cancellation policies will have some form of language to this effect. See, e.g., HDMG, 355 F. Supp. 3d at 380 (quoting event cancellation policy that required that “the loss must be the direct result of an unexpected cause beyond your control”); Info. Mgmt. Network v. Certain Underwriters at Lloyd’s, 2004 NYLJ LEXIS 4607, at *1 (Sup. Ct. N.Y. Cnty. Oct. 15, 2004) (quoting policy that required a “cause beyond the control of the Assured”).

3. Diana Shafter Gliedman, Marshall Galinsky, and Fiona Hogan, “Insurance Likely Kept Swift Out Of The Woods After Vienna,” Law360, Oct. 1, 2024.

4. Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1012 (2d Cir. 1974); see also Universal Cable Prods., LLC v. Atl. Specialty Ins. Co., 929 F.3d 1143, 1154 (9th Cir. 2019) (“[W]ar refers to and includes only hostilities carried on by entities that constitute governments at least de facto in character.” (emphasis in original); Holiday Inns Inc. v. Aetna Ins. Co., 571 F. Supp. 1460, 1503 (S.D.N.Y. 1983) (holding in the insurance context that “war” must be “between sovereign or quasi-sovereign states”).

5. Universal Cable Products, LLC, 929 F.3d at 1161.

6. Universal Cable Products, LLC, 929 F.3d at 1149.

7. Universal Cable Products, LLC, 929 F.3d at 1153.

8. Universal Cable Products, LLC, 929 F.3d at 1154.

9. Universal Cable Products, LLC, 929 F.3d at 1159.

10. Merck & Co. v. Ace Am. Ins. Co., 475 N.J. Super. 420, 425 (App. Div. 2023).

11. Merck, 475 N.J. Super. at 425-426.

12. Merck, 475 N.J. Super. at 428.

13. Merck, 475 N.J. Super. at 427.

14. Merck, 475 N.J. Super. at 438.

15. Merck, 475 N.J. Super. at 430.

16. Merck, 475 N.J. Super. at 445.

17. Merck, 475 N.J. Super. at 426.

18. “Roof at Tropicana Field badly damaged by Hurricane Milton,” ESPN, Oct. 9, 2024.

19. Milad Haghani, “Music festivals are increasingly affected by climate change—is the industry doing enough to mitigate the impact?,” Phys.org, Mar. 13, 2024.

20. Frantic, Inc. v. Certain Underwriters at Lloyd’s, London, No. B326222, 2024 WL 1152376 (Cal. Ct. App. Mar. 18, 2024).

21. Frantic, 2024 WL 1152376, at *1.

22. Frantic, 2024 WL 1152376, at *2.

23. Frantic, 2024 WL 1152376, at *1.

24. Frantic, 2024 WL 1152376, at *3.

25. Frantic, 2024 WL 1152376, at *4.

26. Frantic, 2024 WL 1152376, at *6.

27. Frantic, 2024 WL 1152376, at *9-10.

28. Defeat The Beat, Inc. v. Underwriters At Lloyd’s London, 669 S.E.2d 48, 51 (N.C. App. 2008).

29. Defeat The Beat, 669 S.E.2d at 52.

30. Defeat The Beat, 669 S.E.2d at 51.

31. Defeat The Beat, 669 S.E.2d at 51.

32. Defeat The Beat, 669 S.E.2d at 51.

33. Defeat The Beat, 669 S.E.2d at 51.

34. Defeat The Beat, 669 S.E.2d at 53.

35. HDMG Ent., LLC v. Certain Underwriters at Lloyd’s of London Subscribing to Policy No. L009082, 355 F. Supp. 3d 373, 380 (D.S.C. 2018).

36. HDMG Entertainment, 355 F. Supp. 3d at 376.

37. HDMG Entertainment, 355 F. Supp. 3d at 380.

38. HDMG Entertainment, 355 F. Supp. 3d at 376.

39. HDMG Entertainment, 355 F. Supp. 3d at 376.

40. HDMG Entertainment, 355 F. Supp. 3d at 376.

41. HDMG Entertainment, 355 F. Supp. 3d at 377.

42. HDMG Entertainment, 355 F. Supp. 3d at 380.

43. HDMG Entertainment, 355 F. Supp. 3d at 380.

44. HDMG Entertainment, 355 F. Supp. 3d at 382.

45. Info. Mgmt. Network v. Certain Underwriters at Lloyd’s, 2004 NYLJ LEXIS 4607, at *1-2 (Sup. Ct. N.Y. Cnty. Oct. 15, 2004).

46. Information Management Network, , 2004 NYLJ LEXIS 4607, at *3.

47. Information Management Network,, 2004 NYLJ LEXIS 4607, at *3.

48. Information Management Network,, 2004 NYLJ LEXIS 4607, at *6.

49. Information Management Network,, 2004 NYLJ LEXIS 4607, at *8.