Recently, New York-based insurance broker DeWitt Stern announced that it will offer a new insurance product designed to protect businesses that would suffer loss of revenue due to the cancellation or relocation of Super Bowl XLVII, which is scheduled to take place on February 2, 2014 at MetLife Stadium in East Rutherford, New Jersey. The product, which will be underwritten by Houston Casualty Company, will provide coverage where an insured’s financial loss is due to a cancellation or relocation of the Super Bowl due to “an extreme winter storm” or “acts of terrorism in New York or elsewhere in the country.”
According to DeWitt Stern’s release (available here), the launch of the new insurance product was spurred by the cancellation of the New York City Marathon in the wake of Superstorm Sandy in November 2012, the power outage that occurred at the Super Bowl in New Orleans in February 2013, and the Boston Marathon bombings last month. The 2014 Super Bowl marks the first time that the game will be played in a cold-weather location in a stadium that does not have a dome.
The new insurance product, which is the first of its kind, will feature elements of event cancellation insurance and contingent business interruption insurance. Like event cancellation coverage, the new product will provide coverage for financial losses arising out of the cancellation or relocation of a covered event due to certain covered causes. However, unlike event cancellation policies, which typically insure against economic losses suffered by the organizer of the insured event, the new policy offered by DeWitt Stern will insure against economic losses to local companies such as hotels, caterers, limousine businesses, security firms and others that could stand to lose considerable revenue if Super Bowl XLVII were cancelled or relocated. In this way, the new product is somewhat similar to contingent business interruption insurance, which provides coverage for businesses that are highly dependent on other key businesses for revenue. While contingent business interruption coverage typically requires that the business on which the insured’s revenue depends suffers direct physical loss, the new policy offered by DeWitt Stern will contain no such physical damage requirement.
Coverage under the new policy will, however, be limited to cancellation or relocation of the Super Bowl. The mere postponement of the event would not result in coverage under the policy. Although DeWitt Stern acknowledges that the Super Bowl has never been cancelled or moved to another location on short notice, the broker appears to be confident that a market exists for its new product.
It remains to be seen how many other business will purchase this type of coverage, and it will be interesting to see if others bring similar products to the market in the coming years.