Protecting Party People 11/98

PROTECTING PARTY PEOPLE

Weddings and other celebrations planned months in
advance raise liability issues

By Phil Zinkewicz

The holiday season is upon us. Restaurants, catering halls and other providers of foods and festive services will undoubtedly be very busy in the next few months with Christmas parties, New Year's Eve celebrations and the like, and the potential for profits is colossal. But, so too is the potential for losses, losses stemming from lawsuits when things, for one reason or another, just don't go as planned. In fact, in these days of "niche" marketing, the catering business appears ripe for independent insurance agents to explore because, in the opinion of some, many caterers are either not insured for the exposures they face or not completely insured.

We're not talking about only the usual fire insurance, business interruption insurance or general liability insurance for bodily injury or property damage. Caterers, restaurants and other providers of party services can face lawsuits for non-performance, an errors and omissions exposure that many in the catering business mistakenly believe is covered under their general liability policy. But consider the following cases to get an idea of the magnitude of exposure that exists.

A young couple is planning to get married. They contract with a catering hall more than a year in advance of the wedding date for a space for the reception, food to be served to the guests, flowers on the table, etc. During that year, they arrange for a deejay to play music on the evening of that date. A photographer is also arranged, as is a church...for that date. Wedding invitations are printed noting the date that invitees are asked to attend. The wedding will be held on the East Coast, but the groom's family will be flying in from the West Coast to attend the wedding and reception. They have to make plans--airline tickets, hotel reservations--to make sure that they are present on that date. Even wedding rings have been purchased and engraved with the wedding date.

Less than two months before the wedding, the couple is called by the catering hall and told that the room for which they have contracted was mistakenly "double-booked." Another couple has also been promised that they will have that same room for their wedding on that same date--a couple that has probably planned every detail in the same way as the first. An event that should have been looked forward to with joyous anticipation has turned into a nightmare for all involved-- certainly for the young couples who now must scramble to resolve a mess not of their own creation and also for the caterer who now faces the possibility of at least one lawsuit.

Here's another scenario. A restaurant, one of a well-known chain in New York, does a good deal of its business providing an upstairs room for private parties--retirement celebrations, wedding showers, birthday parties, etc. Again, these types of events are planned for specific days and usually are planned well in advance of the event. On arriving for work one morning, the restaurant's manager noticed that the appointment book, always kept on a desk by the entrance, was missing. Who took it? A drunk playing a prank? A disgruntled customer? A mean-spirited competitor? What does it matter? The point is that the manager did not set up a duplicate book and six-months of advance reservations were irretrievable.

Both of these cases are true. In the case of the young couple, a compromise was worked out, not all that amicably, with the caterer grudgingly agreeing to pay for the additional costs of a new venue for their reception. The caterer also paid for the reprinting of the invitations. In the case of the restaurant, the manager immediately called all those customers he did remember had booked, and then waited for others who, he hoped, would call in advance of the parties to confirm. But the results could have been disastrous in both cases.

"When we speak of the catering industry, we include caterers who may be acting individually or as part of a package put together by a party planner," says Mary Saunders, territorial manager for the Evanston, Illinois-based Shand Morahan. Very often, caterers don't realize that they could face exposures that go beyond bodily injury or property damage. In the case of the marrying couple, if they had signed a contract, the caterer could have been sued for all the expenses the couple might have encountered--the re-doing of the invitations, perhaps the re-engraving of the wedding rings if the date had to be changed, or the expenses of the travelers who might have had to re-book for the same reason. But more than that, there would have been the couple's mental anguish that was the result of the trauma of having one of the most important days in their lives nearly ruined because of a caterer who "double-booked."

Saunders says that party planners who hire caterers usually know about the exposures and purchase additional coverages for E&O exposures, but that there are many caterers who act individually who do not. In addition, she said, there are few underwriters out there who write the coverage, so there are opportunities for agents who can put together a group of exposures and approach an underwriter with a program and become a program administrator.

"At Shand, we write party planners, but just the E&O coverage. But if approached by an agent with a program, we would be able to write the E&O coverage and, through one of our affiliates, handle the traditional exposures as well," says Saunders.

But caterers E&O is not the only opportunity open to agents in the area of parties. There also are coverages available for the individual participants in such special events--the bride, the groom, the parents who may be paying for the wedding--that agents should perhaps be looking to as potential markets.

One agency that specializes in wedding coverages is R.V. Nuccio & Associates Insurance Brokers, Inc., in Fawnskin, California. In fact, Robert Nuccio, the head of the agency, has authored a special policy for such events called "Weddingsurance, Barmitzvahsurance and Celebrationsurance."

Says Nuccio: "The policy represents a unique and exclusive packaged insurance product, specifically designed to protect the financial investment of someone's wedding or very special private event. When the individuals providing the funding begin to add up the total cost of the event, they will find that it reaches a tidy sum, all of which is at risk should something unexpected happen. Most of the nine coverages are available on an optional basis and can be tailored to meet the financial specifications of a particular wedding or other private event, with the one-time premium starting at $195 and coverage beginning up to two years prior to the wedding or other private event date."

Nuccio says the limits on coverages, which are underwritten through Fireman's Fund, vary depending upon the insured's choice; and protection is provided for cancellation or postponement of the event because of sickness or injury to essential parties, loss or damage to the bridal gown or inaccessibility to the premises where the event is being held (change of heart is excluded). Additional expenses related to the cancellation or postponement also are covered, for example, the need to choose an alternate site for the event as in the case of the young couple mentioned above.

Photography expenses, should something go wrong with the film and re-takes are necessary, also are covered, as are travel expenses for the bride or groom if necessary. The photography coverages are optional, as are coverages for lost, stolen or damaged gifts, rented property, special attire, jewelry, personal liability and medical payments.

Nuccio has found that this is an area that does well for his agency, but it also provides a valuable service to people who are investing a good deal of time and considerable money to make certain that a financial loss does not occur from a special event.

For agents seeking a new niche, then, whether it is providing coverages for caterers a la Shand, or for individuals a la Fireman's Fund, the opportunities are there. *