Insights: Where the Liability Might Stop: Broker Liability for Lack of Coverage for Live Event Cancellations Related to COVID-19

COVID-19 has hit few businesses as hard as the live events industry, especially early in the pandemic. While bands, comedians and others on tour have often suffered significant financial loss, recourse may be available if their professional advisers have failed to secure adequate insurance coverage. The law may provide an avenue of recovery from insurance brokers who cater to the entertainment industry but have failed to obtain coverage, as recent litigation claims.

Legal framework.

Depending on the state where an insurance broker, manager, or potential policyholder is based, the broker may owe their client one or more fiduciary duties. In broad terms, this would mean that a broker would be required to put their client’s interests above their own interests and always act in good faith and in the manner that is best for the client.

Although a broker has no fiduciary duty, he should be aware that communications with a potential policyholder could result in legal liability. For example, a broker’s action or inaction could result in claims for professional negligence or breach of contract.


Before the public heard of COVID-19, businesses seeking insurance often received communicable disease coverage by default, unless specifically excluded. Often brokers could ensure that coverage was included by the insurer as an added value or sweetener provided at no additional cost to policyholders – such as businesses in the live event and entertainment industry – who might be affected by closures related to communicable diseases. Insurers believed the risk was remote enough that extending coverage at no additional cost or systematically was uncontroversial. Simpler times indeed.

While insurers rarely provided coverage without questions or exclusions, if an insured had that specific coverage, they had a means by which they could seek financial recovery in the event of losses after an outbreak.

The client’s best interest was served by obtaining such coverage, but when a risk is perceived to be remote, a broker can become complacent and lose sight of what they should be doing.

Everything changed around the turn of the New Year in 2020 after it was reported that a coronavirus outbreak in China could cross US borders. The insurance industry ended its practice of automatically offering communicable disease coverage to potential policyholders and made a strategic decision not to offer communicable disease coverage, even if a potential policyholder requested it.

Companies that didn’t get coverage before the start of 2020 found themselves in a vulnerable position, but sometimes it wasn’t their fault. Sometimes they did the right thing by hiring a broker who knew their business, knew the standard live entertainment insurance industry practice of having insurance coverage in place about six months before a event, knew that a communicable disease outage could result in a total loss for a client, but the broker simply did not follow through.

Potential liability of brokers

Among other things, touring entertainment shows could have claims against their broker if they find themselves without communicable disease coverage for live events canceled within a certain time frame.

As an example, consider the following scenario: A touring actor or his manager hires a broker to obtain insurance coverage for a live event that will take place in April 2020, just after the start of the mid- March. The broker should or should have been aware that, as is common practice in the live event insurance industry, communicable disease and other event insurance cover should be in place around October 2019 or approximately six months before the event. planned event. Broker fails to get communicable disease coverage by October 2019. Three months later on January 1, 2020 broker still failed to get communicable disease coverage and the insurance industry withdraw the cover offer.

In such a case, the broker could be exposed to claims by the tour deed. The manager of the deed may also have claims, especially if he was entitled to a percentage or commission from the income of the deed and the broker knew of the existence of the manager. Often the broker would have been hired by the manager.

Depending on the jurisdiction, terms of engagement and other factors, potential claims may include, but are not limited to, breach of fiduciary duty, professional negligence and/or breach of contract. The broker likely has errors and omissions insurance against the risk of such claims.

Example: Motley Crue. A 2021 lawsuit explores some of the legal concepts at play in such a case. The rock band’s management team has sued its insurance broker for allegedly failing to timely obtain appropriate insurance coverage for a 2020 stadium tour. According to the lawsuit, executives say they appealed to an insurance brokerage firm that presented itself as having expertise in the sector. In October 2019, the managers asked the broker, who had acted for the managers in the past, to obtain tour cancellation insurance for commissions lost due to any postponement or cancellation of the upcoming tour. In the months that followed, officials say they sent the broker a copy of the tour contract, exchanged emails about tour details and reiterated their request for coverage. The broker never indicated there were any issues obtaining coverage, according to the lawsuit. Unfortunately, on March 9, 2020, the managers learned that the broker had not obtained the insurance.

Two days later, the World Health Organization declared a pandemic, and we all know what happened after that. The lawsuit alleges that the broker was liable for professional negligence in breaching its duty to act with reasonable diligence and promptness to obtain a requested insurance policy. The managers also claim that the broker broke a verbal contract to obtain the insurance. In the lawsuit, the managers are asking for more than $10 million, for commissions they say they lost because the broker didn’t get the insurance.

The case is ongoing and the broker denies any liability. But the plausibility of such assertions is not reasonably questioned, as a general legal question.

don’t stop believing

Those in the live events industry who have suffered severe losses due to COVID-19 cancellations should consider consulting legal counsel to assess all recovery options before making it a loss and moving on. .

Comments are closed.