This a tough time for everyone. The COVID-19 pandemic, however, places event and conference organizers in a particularly tough predicament: whether to proceed with their event, cancel or postpone it. While many states are now rolling out orders banning gatherings over 50-100 people and thus effectively banning most events, some events that are weeks or months out may not be subject to such orders. Cancellation, of course, can result not only in lost income but can cause a significant financial loss – perhaps at levels that some organizations cannot survive. It also may harm event attendees, vendors, performers, production companies, speakers and other third parties, and in some cases, entire communities. Therefore, event organizers have to make some tough decisions. Here are some key factors for consideration.
Tort and Contractual Liability
Tort: There is a risk that your organization will be hit with lawsuits relating to the spread of COVID-19 if an organizer does not cancel. While there is a possibility of negligence-based claims or even a class action, causation issues might make liability difficult to prove. However, event organizers should discuss with legal counsel the practical and legal risks associated with potential tort claims if they proceed to have the event.
Contracts: There is a risk of litigation from vendors, sponsors, performers, presenters, speakers, hotels, production companies, service providers and other third parties for breach of contract or other related claims if an organizer cancels and the organization cannot meet its obligations.
Advance, Controlled Cancellation verses Last-Minute, Forced Cancellation
Many organizers have waited to the very last minute to cancel their events, while others are taking the opportunity to cancel or postpone their event weeks or months in advance. If the event is ultimately canceled, there is some advantage to an event organizer that takes control of the cancellation process in advance. Event organizers should, therefore, consider both legal and practical business implications of advance versus last-minute cancellation.
Forced Cancellation: As we have seen recently, governments have been issuing orders or interfering with events, forcing last-minute cancellation. This creates the possibility of increased potential liability versus an advanced, controlled cancellation because there is little or no time to mitigate potential damages, including contractual obligations. In addition, last-minute cancellations may impact event attendees that have already traveled or cannot obtain last-minute refunds on travel plans. This may cause backlash from the event’s customers and impact goodwill. Advance cancellation provides all stakeholders greater opportunity to mitigate damages.
Advance, Controlled Cancellation: While an event organizer may choose to roll the dice and wait until the last minute to see if they can avoid cancellation, an event organizer that takes advance control has the opportunity to mitigate damages, evaluate agreements and obligations, including insurance agreements, and consider the pros and cons of different decisions and mitigation strategies.
- Opportunity to Consider Insurance: If an event is forced to cancel at the last minute, organizers may not have time to consider its insurance coverage under different situations, and thus how to best position itself considering its existing coverage. For example, does the event have commercial liability coverage that covers COVID-19 claims? Are damages from pandemics or natural disasters exempt? Does it have event cancellation insurance? Will a force-government cancellation affect coverage issues? We advise that you discuss your current policies with legal counsel to consider your best options well in advance of any possible cancellation or postponement. We also advise that event organizers contact their insurance brokers and ask questions, in writing, about what their insurance covers.
- Contractual Obligations:
- A controlled, advance cancellation allows organizers to consider its obligations to vendors, venues, hotels, speakers, performers, and presenters, attendees and customers, production companies, and other third parties, and look for possible opportunities to leverage compromise, shared liability, or settlement despite event terms or agreements (e.g. no refund clauses).
- For example, if an event has committed to a certain number of hotel rooms, it may be able to negotiate a deal with the hotel to credit some of the rooms or refund them to guests by moving the event date or committing to a deal for the next year’s event.
- Review agreements for “Force Majeure” or other “out” clauses. Many agreements include clauses that may give organizers certain rights – if not a complete out – in certain situations that are out of everyone’s control (e.g. “acts of god”). Advance cancellation may provide time for an organizer to work with legal counsel to determine what agreements may provide relief under the circumstances. For example, if an agreement provides relief if the event is forced to cancel, it may be strategic to work with the local health department or other governmental entities to discuss the fate of the event.
- Refunds v. Credits: Advance cancellation may give more time and space for an organizer to postpone the event or plan for the following year’s event. This may allow the organizer the ability to offer credits for future events rather than facing the prospect of losing significant money by offering massive refunds.
- Backlash and Goodwill: Both canceling or refusing to cancel could be damaging to an organizer’s or event’s goodwill depending on the circumstances. Refusing to cancel may create social backlash as irresponsible by contributing to spread or by placing paid attendees, vendors, and staff in a position of deciding to put themselves and families at risk, if not make a socially irresponsible decision, versus canceling their trip at risk of financial loss due to the lack of availability of certain refunds. This may not play out well for the organization. Moreover, cancellation may also cause backlash from certain groups, such as trade show vendors that invested thousands of dollars on their exhibit and staff, much or all of which is not recoverable.
Other Options: Postponement and Virtual Events:
Reschedule the Event: Event organizers should consider whether it is practical to move the event to a date later in the year. While moving the date will likely result in the loss of a percentage, if not a majority, of its attendees, it still may result in smaller, more manageable losses and damages than outright cancellation. It may also serve to generate additional goodwill. Some practical considerations include timing, venue availability, presenter, speaker, and performer availability, and the timing of other events that may conflict or be considered competitive.
Virtual Events: Virtual events are a growing trend, and may be a viable solution for some events that is better than outright cancellation when rescheduling a live event is not possible. Virtual events won’t match the live experience, but may still meet certain attendee and organizer needs. A virtual event can be more than a video conference or webinar as they may include some elements of a live conference, such as interactive discussions, networking, sponsorship, and other resources. Applications such as Zoom and Slack might be possible solutions, as well as many others.
Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.