Coronavirus and Meetings
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Updated March 27, 2020 at 4:20 pm EDT
As the COVID-19 outbreak continues to spread globally — now to 168 countries and counting — event organizers have a lot of questions. For those with meetings or attendees in the areas most affected by the coronavirus, the questions invariably involve the legal measures associated with cancelling — or simply performing far below initial projections in terms of attendance or exhibitors. Attorney Barbara Dunn Esq., a partner with Barnes and Thornburg LLP, and Jack Buttine of Buttine Exhibition and Event Insurance sought to provide answers in a recent IAEE webcast discussion about COVID-19.
First and foremost, confirmed Dunn, general crisis-management protocol should apply, and open communication is essential. "Whether your show is next month or whether your show is in six months, and no matter where your show is, we definitely need to talk about this issue," she said. "And as is the case with any crisis management, the place we usually begin that discussion is with contracts."
In situations like this, Dunn pointed out, force majeure becomes the provision most focused on — a.k.a. the "act of God" clause, or simply put, forces beyond the control of the organizers. The question is, how will that be defined in this outbreak? Given the swift spread of the virus, it's difficult to predict its effects with any certainty. That said, Dunn explained, any force majeure clause can be broken down into three primary components:
1. Naming the Disasters
"This is the list of all of the so-called bad things that can happen," Dunn explained. "War, terrorism, hurricane, disease, flood, etc. This list can be short or it can be very long, but it typically will have a catch-all statement at the end such as 'any other cause beyond the party's control.' In terms of the coronavirus, it's probably fairly easy to say that the virus checks a box on that list, even if it's just in the catch-all statement."
2. Standard of Impact
"To me, this is the most important part of the clause — and it's often the most difficult part of the clause to meet," Dunn said. "We have to establish or prove that this particular event has a certain level of impact on our ability to perform that particular contract."
For example, has the disruptive event rendered your ability to carry out the contract as "illegal or impossible or commercially impracticable"? Or does it impact 25 percent or more of the people from coming to the conference or the trade show? The first term, "illegal," would typically be the hardest to meet — but it has come into play in this crisis. Is the event scheduled to take place in a location where the government has banned events of a certain size from taking place? Or have quarantines been imposed that would negate the opportunity to meet in this location? Similarly, an event might be considered "impossible" if it is scheduled to occur in a country or region where flights have been temporarily suspended.
A state of emergency, on the other hand, such as those declared by a number of states in the U.S., is not, as some assume, an obstacle that necessarily prevents the meeting from taking place.
The public or state emergency "is basically a call for
additional financial and other assistance from the state if you are a city and
from the state to the federal government," said Jonathan T. Howe, Esq., president, and senior and founding
partner of Howe & Hutton Ltd. — and as such, is not covered by the force majeure
clause. Howe acknowledges that the current situation is complicated, with no small amount of gray area.
"A lot depends on how the force majeure clause reads, and so far we have not seen any stock clauses that
would cover COVID-19 at this time. The Italy, China and other quarantines
and travel bans issued by a government body could possibly be asserted to
limit liability." But, he adds, "a corporate ordered travel restriction will not unless
set forth in the contract."
A more common situation in the case of coronavirus is that the event
could be determined as "commercially impracticable." This is a term of
contract law, Dunn explained, that means it isn't practical to carry out
the show. "In this case, the business minds would agree that
performance would be burdensome, expensive, potentially dangerous, etc.
And that's an easier standard to meet," noted Dunn — if not necessarily
as cut and dried in terms of evidence.
Now that an increasing number of hotels have temporarily closed, however, the case has become more black and white for many planners. If the meeting venue has shut down, that's an obvious case of force majeure.
"Right now, the biggest problem we have is no one knows what the heck is going on and how far out this is going to go," added Howe. "So it becomes a question now of being in communication with your vendors and saying, 'let's face it, we're in a real predicament; it's going to be a financial problem for everybody. And we don't want to go to court or arbitration, saying that we want to compel these people to come to our program when we're faced with all of these public safety announcements and the like.'"
Most hotels and suppliers have been forgiving, Howe said -- "but there are always some that aren't," he cautioned. "The big thing I would say to everybody now is to get on the phone, stay in communication, look at what your suppliers and potential attendees are doing, and check your insurance — if you have cancellation or business-interruption insurance, that will soften the blow."
3. Partial Performance
This component, which isn't always part of the force majeure clause, would apply to groups that could invoke force majeure and cancel without liability, but elect to have the event anyway. "The group could still perform the contract and not be subject to things like attrition fees for rooms, or for food and beverage, things like that. In my opinion right now, knock on wood, if meetings aren't canceling, but the shows are expecting reduced attendance, this provision is going to be particularly important," Dunn explained. "So one of the things I would recommend is to look at the force majeure clause in all of your contracts and see if there is any protection for what I'm referring to as 'partial performance.' And even if you don't see that language, I wouldn't necessarily be concerned — because you still can rely on your relationships with your partners to negotiate this. Because everyone is in this together."
A Word About Insurance
The most important point: If you haven't already purchased communicable-disease insurance, confirmed Jack Buttine, you won't be covered for coronavirus. That insurance would have had to have been purchased before the coronavirus was identified, which happened in December.
For those considering purchasing communicable-disease insurance for the future, Buttine said that the cost varies depending on how far in advance of the show the insurance is purchased. "For a show happening in May, we just sold communicable-disease insurance for 1 percent of the total estimated total gross revenue of the show," he said. Crucially, that excludes diseases we already know about. Communicable-disease insurance, pointed out Buttine, "is about the risk of the unknown."
You can hear the archived IAEE webcast in full here.