The annual NCAA tournament brings in the usual risks associated with college-level sporting events, but some of these risks are enhanced due to the level of play, the venues and the extreme popularity of the tournament. We had the opportunity to chat with Peter Williams of Allianz about the insurance aspects of covering such events. In talking to Williams we were surprised to find that insuring such a big event is pretty straightforward. Williams indicated that, in large part, it’s commercial property and liability coverage but on a much larger scale.
Basically, the insurance coverage that is required for an event like an NCAA Final Four tournament game is a typical commercial business policy. Tournament games are played at various arenas in regional locations to accommodate the size of the crowds anticipated for the multiple games.
Williams indicated that each location handles its own coverage. Postponement of a game is not covered under the policy, particularly if the game in question is a game early in the tournament. Many venues find that game postponement is not necessary coverage because, due to the nature of the tournament, all of the games must eventually be played. A mere change in date or time of the game will not significantly change the revenue outcome for the venue.
The real risk, from an insurance standpoint, are the later games, particularly the Final Four. The Final Four games generally make bigger ticket revenue and have a higher television price.
Since postponement isn’t detrimental to the venue, cancellation becomes the biggest issue. A game may be canceled for physical damage to the auditorium, including water damage, flood or fire. A game may also be canceled for terrorism threats or threat of an incident, such as the Las Vegas shooting. If a disaster occurs that is so detrimental to the arena that the game cannot be played there, the venue’s insurance will respond to cover the lost revenue. Even so, the event can be moved to another venue, and there are often contingency plans for such occurrences.
The games are going to be played eventually but, fans who bought tickets to a game scheduled in Cleveland might not be eager or able to travel to Miami to watch a game, so their tickets will have to be refunded and re-sold. Tickets must be reprinted, receipt numbers must align, row numbers must be changed and all banners, t-shirts, flyers and souvenirs must be reprinted. Costs associated with the adjustment from one venue to another would be covered.
Because of the popularity of the tournament, though, it is likely that a game, especially one further along in the tournament, will sell out no matter its location or the time the game will be played. The venue may suffer from a loss of revenue, loss of sponsorship and loss of food and beverage sales if a game is postponed from a primetime Saturday evening slot to a Tuesday afternoon slot. Likewise, television revenue is a large issue; advertising space may be at a premium on a Sunday night, while advertisers may not be willing to pay as much for a Tuesday afternoon. All revenue sales are insured under the applicable insurance policy, so if a venue cannot host, they will still receive something.
Vendors that come to the premises to sell each have their own insurance policy. Any liability stemming from those vendors, including personal injury such as food poisoning, should be covered under the vendor’s policy.
Generally, the venues that are chosen to host March Madness games are well-known venues that are often used for huge events, including sports events, festivals and concerts. Williams indicated that underwriting is fairly easy as the venues are well known, and able to handle large crowds. In case of an evacuation, venues are built with anti-slip flooring, and janitorial staff generally cleans up spills very quickly.
In case of a newly constructed venue being chosen, the insurance risks could actually be smaller than known venues, as new venues are constructed with state-of-the-art features, and experienced management may be brought in from other venues to help deal with large crowds. Liability associated with large crowds becomes a big issue when discussing the evacuation of the venue if a disaster occurs.
Just like any other large sporting event, local law enforcement and even the FBI are very watchful of these NCAA events, and security is tight. Hopefully, there will be no incident, but if there is a gunman, a bomb threat or a terror threat, local law enforcement in host cities are trained to deal with disasters involving large numbers of people and are well equipped to handle a situation if one arises. The venue itself, and therefore its carrier, is not likely to be liable for losses from disasters or terrorists.
After the game, sometimes there will be altercations between the fans of the winning and losing teams. Law enforcement is also well equipped to deal with these types of situations and can diffuse an altercation quickly if one arises. Williams also indicated that the venue plays its part by shepherding event-goers through metal detectors before they are allowed to enter the event, and by cutting off alcohol sales sometime before the end of the game, allowing fans to sober up a little before heading home or heading out to celebrate a win. Fortunately for host cities, the NCAA fans are not quite as extreme as some other sports fans. Even so, if fans destroy vehicles or shops, the venue and its carrier are not liable for those actions and the carrier will not be called on to provide coverage.
Cyber risks and the precautions that are taken to prevent a cyber attack are often unknown. In order to execute an effective attack, it would have to be very sophisticated to keep up with precautions put in place by the venue, law enforcement, and television networks. A cyber attack could interrupt the transmission of a game over network television, but this risk generally only becomes an issue with pay-per-view television programs. Insurance coverage for losses that occur due to a cyber-attack is available as a special policy.
