Risks on Stage: New World, New Life in Entertainment Business
Spectator Safety, Natural Catastrophes, Rising Costs Top Concerns Today
As theater shows and live events return to full force this year coming off pent-up demand, underwriters are placing extra scrutiny on safety, resulting in increased rates and tightly worded policies.
Specialists in the entertainment insurance industry say that coverage for venues, performers and promoters is attainable, but parties must demonstrate adherence to safety measures protecting performers and spectators alike.
In the past few years, underwriters and brokers have become more strict with underwriting guidelines, and requests for risk services and risk management, said Carol Bressi-Cilona, vice president of entertainment and sports new business marketing at HUB.
Underwriters demand that everything be detailed on applications and in writing, and they want to know venue owners’ plans for catastrophe scenarios.
“It’s like we’re starting all over again in insurance, in a new life, a new world of technology, a new world of risks to consider, and the likes we’ve never seen before regarding active shootings, terrorism, weather catastrophes and more,” said Bressi-Cilona.
Event organizers seeking general liability coverage should expect to pay 5% to 10% more in 2023, according to HUB International’s 2023 Outlook for Entertainment & Sports. Umbrella and excess liability coverage could increase by 10% to 20% as “carriers continue to reduce capacity due to social inflation and nuclear verdicts that exceed primary limits,” HUB said.
Not the Same Old Song and Dance
As theater productions grow in complexity, so do the risks underwriters take into account when determining coverage. A drama or comedy play is typically easier to attain coverage for, as there are few moving parts. Musicals with lots of song and dance or artistic shows where participants fly in place or perform repetitive motions typically draw more inspection, said Michael Furtschegger, global head of entertainment at Allianz.
“It’s similar to filming. If you have a drama at the studio or an action movie, the nature of the risk would certainly be different,” said Furtschegger.
Underwriters take into consideration the number of performers involved in a production, what the stage looks like, how many shows are performed consecutively and whether there is enough time in between for rest and travel.
Claims due to injuries for cast and crew are usually covered by workers’ compensation, and rates are highest in states with the most concentration of performers: New York and California. For dance and ballet companies, some carriers are pulling back from offering workers’ compensation because they can’t handle the claims situation, said Bressi-Cilona.
In New York, workers’ compensation rates for theatrical productions are either based on non-musical or non-dance plays or they’re based on musicals with dance. The rates for musicals with dance are sometimes four times higher than the non-musical/non-dance rate for cast and crew.
“New York presents most of the Broadway and Off-Broadway types of theatrical productions which engage many shows with large numbers of cast and crew, so if it’s a musical with dancing and acrobatic movement, there is a higher risk that promotes much more of a chance of physical claims,” said Bressi-Cilona.
Underwriters also want to know whether a production uses any stunts or hazardous activities such as pyrotechnics, or if there is audience involvement.
“You had a show like Spider-Man a few years back that had a lot of elements of the production that were over the audience and obviously that brings a whole other set of exposures with it,” said Peter Shoemaker, managing director at Risk Strategies. “Or you have the chandelier in Phantom of the Opera that swings out over the audience.”
Another item underwriters must now account for in some productions is the use of drones. They’ll want to make sure that whomever is operating the drone is experienced and whether the drone is flying out above the stage area or over the audience.
“There’s a lot of different types of questions that will come up depending on the specific attributes of the show itself,” said Shoemaker.
Spectator Safety
The use of drones and pyrotechnics in theater productions are a sampling of spectator safety risks that underwriters consider when determining coverage for live entertainment venues. The COVID-19 pandemic led event organizers to seek protection against communicable diseases.
While COVID is no longer top of mind for event venues, the return of full capacity crowds puts the spotlight on crowd control risk management.
At live music venues, claims primarily arise from slip-and-fall accidents to assault and battery between patron-on-patron or security-on-patron, said Paul Bassman, practice leader for the sports and entertainment division at Higginbotham. For theatrical productions, underwriters will want to know whether any elements of the show are going to extend off stage into the audience.
Venue owners and event organizers face more pressure to display security measures in light of recent tragedies like the 2021 fatal crowd crush at the Astroworld Festival in Houston, or the Illinois theater roof collapse following an April tornado. Underwriters will ask for information on event safety, such as the number of evacuation routes and whether they’re well-lit.
Some insureds may be asked to provide metal detectors in light of increased exposure to active shootings. With firearms, laws can vary from one state to another as to whether somebody is allowed to carry. An underwriter may feel better about writing coverage in a state that has laws against carrying guns in public versus a state that doesn’t, according to Shoemaker.
Rates for liability coverage have leveled off since the pandemic, Shoemaker said, but carriers are less inclined to provide higher limits.
“In the past maybe where an underwriter would say, ‘We’ll put up $10 million of liability coverage on this risk, they may say, we’re going to cut that back to $5 million or $1 million,'” said Shoemaker. “An insured has to go out to other insurance carriers and build up a tower of excess limits above the quote that you have.”
Return of Festivals and Touring
Live outdoor festivals and touring productions are expected to make a major comeback this summer, bringing their own types of exposures.
For outdoor shows, weather-related coverage can play a factor in driving up pricing, entertainment specialists say.
“Though these festivals are rated on either the total gross revenue or total costs and expenses, the variance in policy pricing is based mainly on the time of year and the location of the festival — for obvious reasons,” said Bassman. “A festival during hurricane season on the east coast will be considerably more expensive than a festival in the spring on the west coast.”
Other underwriting components that go into insuring live outdoor events include capacity of the venue, security protocols and alcohol controls, said Ryan Jones, broker, Insurance Office of America, specialty and entertainment division.
“If you have an at-capacity, packed event with understaffed security and inexpensive alcohol, that’s a problem to an underwriter,” said Jones. “All precautionary measures must run together congruently to ensure that everything is being done appropriately for the protection and safety of the guests.”
Touring shows, whether concert or theatrical, add increased exposure for damage, lost items or maintenance issues during transit. Productions may experience property break down from travel or during construction and reconstruction.
If a touring production is traveling during the winter months, for example, weather and travel risks are different than in summer, and Allianz will look at the insured’s itinerary very closely to identify where they are going and how they are traveling.
“In the Midwest in the winter time it can be very harsh,” said Furtschegger. “Maybe you have an issue on arriving on time with equipment and you run into risks that you are not even able to stage the show on time because your travel has an issue.”
Touring acts that travel to California or the West Coast face exposure to earthquakes. Similarly, productions traveling along the East Coast or in the South have a greater risk of windstorm damage. In either case, an insured could experience a business interruption loss if it is not able to perform at a venue.
No-Show
As long as there have been live entertainment productions, carriers have provided forms of event cancellation coverage, often under contingency or non-appearance. Contingency coverage offers financial protection to productions when an event can’t go on as scheduled, while non-appearance covers a star performer when they’re sick or injured.
Prior to the pandemic, carriers offered a theatrical broad performance disruption option on their theatrical floater program that did not exclude COVID in most circumstances, causing the carriers to get crushed, entertainment specialists said.
Bressi-Cilona recalled a performance disruption form from a couple of carriers which had no COVID exclusion and covered anything after a two-performance deductible.
“Evidently, they had more than two performances being lost,” Bressi-Cilona said. “For example, if the show carried a $10 million limit under the performance disruption coverage, the producers of that show were most likely paid dearly by the carrier.”
Post pandemic, those performance disruption forms are now gone, though lately some carriers have introduced some new variations of performance disruption and more of a business interruption type form.
“After the pandemic some carriers have removed coverage for civil commotion, civil authority, riot, war-like behavior and the extra expense paid and associated with these coverage enhancements, which pre-COVID were automatically included,” said Bressi-Cilona. “The current market is not so much about higher rate fluctuation and changes but about reduced or removal of certain coverage of what used to be provided.”
Venue owners, entertainers and promoters should act quickly to obtain non-appearance and event cancellation coverage, according to Jones. What each party needs to be aware of is that all three groups are probably buying the same insurance on the same risk at the same time, but for their own interests.
“The artists are getting non-appearance coverage for themselves because if they are suddenly unable to perform due to medical or logistical reasons, they lose out on the revenue,” said Jones. “If you’re a venue owner and your show is cancelled due to the artist’s non-appearance, you lose, too. And if you’re a promoter, the same loss occurs. So under any of these circumstances, multiple people are hoping to be covered at the same time.”
Inflation Hides Backstage
If 2022 was the year that theaters and concert venues turned the lights back on, 2023 marks a return to pre-pandemic levels of demand for live entertainment. Every major touring entertainer capable of touring has toured or is going on tour, said Jones.
The return of touring acts and Broadway acts is occurring amidst an inflationary environment that cuts into the wallet of show-goers. Inflation and a faltering economy are among the top risks to profitability for live entertainment, HUB said.
Reduced discretionary spending and increased ticket prices will force entertainers to work harder to attract audiences. Simultaneously, entertainers must account for inflation in acquiring insurance.
“In the live entertainment space, your budget and admissions are underwriting figures that go into the calculation of your premiums,” said Jones. “It costs much more to put on a show than it did even three years ago, and because of that, all other expenses, including the charges for insurance, have risen.”
Entertainment specialists agree that for now, performers, promoters and venues are willing to pay the price for necessary coverage. After all, the show must go on.