The list keeps growing. Yeah, that list. The litany of events that, due to COVID-19 “Coronavirus,” have had long, cold, very frank talks with their risk management advisors and insurance carriers to take financially “safer” actions by canceling their events.
Organizers of the South By Southwest music and cultural festival in Austin, Texas, chose to take a pass this year. As of this writing, the Coachella music festival is in talks to move its dates to the fall. The Geneva Motor Show said, “No thanks” to opening its doors a mere 72 hours before it was scheduled to open. The Bahrain Formula 1 Grand Prix will go ahead, but with no audience in the grandstands. The Chinese F1 GP has similarly been put on indefinite hold.
New-car launch programs have been suspended by General Motors, Bentley, and others, but some are taking the risk to go ahead with their plans. Even the NBA, professional tennis and NCAA have been affected, some thinking about holding events with no audience other than TV.
Suffice to say it’s a hell of a mess. Journalist’s calendars, normally jammed at this time of year with programs to attend, find themselves with time on their hands that mimic the Christmas/New Year break. I’m not one to succumb to turmoil and hype, but then I’m not a younger PR rep for an OEM with a younger family at home being bombarded with a CoronaHype festival being staged 24/7 on TV. I’m also one of those whose personal memories include H1N1 Swine Flu, SARS, Ebola and many others, and astonishingly, I’ve survived.
To me, the hype of the current situation overshadows by orders of magnitude the actual danger. I subscribe to normal and customary precautions and would suggest that if others followed those simple rules and guidance, odds are well in their favor that they, too, will emerge with but a memory of what was a media-created maelstrom.
But we’re ‘car people’
I’ve predicted here that in light of the spate of large group events and conventions across the country, the organizers of the New York International Auto Show will have no options but to pull the plug on their early April expo.
When the Geneva show put out its statement of cancellation, it made sure to include the term “force majeure” in the text. It was almost too much, which is what made it glaring to me. Why is that phrase of abject legality significant? As with most things, the first level to look at is the financial aspect. And with the show (for the most part) already moved into the Palexpo Center in Geneva, I’d draw attention to something I can’t see, but what I suspect. I’m thinking that the overall liability and insurance for the event had not only generic contents but also some proviso of coverage in the event of things that are out of the control of the organizers.
Here’s a more specific definition and application: A Standard Clause governed by New York law that allows the contract parties to allocate the risk of certain force majeure events such as acts of God, hurricanes, earthquakes and other natural disasters, terrorism, government acts, embargoes, labor strikes and lock-outs, and other events beyond the control of the parties. This Standard Clause excuses the party impacted by the force majeure event from performing its obligations.
New York courts define force majeure as “an event beyond the control of the parties that prevents performance under a contract and may excuse nonperformance.” (Beardslee v. … 2015) Force majeure clauses excusing non-performance due to circumstances beyond the control of a party are narrowly construed under New York law.
The “force majeure” notation, according to insurance and re-insurance folks I’ve spoken with, would trigger that as a payable event, as when the Swiss government ordered no gatherings in excess of 1,000 people, it was the decision of the government, not the organizers. The insurance would kick in to cover the organizer’s expenses in hall rental and other ancillary costs to whatever level the policy was written. Nothing nefarious there. Actually, just good business to minimize risk, and to this point, at least, probably not even a rider that would have incurred a stratospheric addition to the premium paid for the overall policy.
Everyone in our media circles this morning rose and checked our normal sources for information, and most anticipated some sort of news update from the New York show, as the last official communique on the topic was March 3, a lifetime when Coronavirus dominoes are falling almost hourly.
Adding to the blend of speculation was New York Governor Cuomo’s declaration over the weekend of a “state of emergency” existing. While certainly inflammatory in its undeniable political implications and opportunity, it was explained as merely a means of opening up certain avenues of revenue to help defray costs of testing kits and other related expenses.
But Cuomo’s declaration may have also triggered an opportunity for NY show organizers to at least minimize their exposure. If the NYIAS or any event in NY was limited in its size (as occurred in Geneva) to similarly indemnify itself from the costs that were previous-to-this-point expended and for other monies to plan and operate the show. While the Greater New York Auto Dealers Association, which produces the show, most likely has enough cushion in its coffers to withstand a year without a show for revenue, if it can find a way to minimize that exposure, well, hell, why not?
It gives me pause to wonder if a similar set of conversations between the Javitz Center and Cuomo’s office in Albany aren’t taking place, with the show looking for a means of laying off the choice on a directive of the state, thereby triggering the insurance. Another “force majeure” episode, you see.
Playing chicken with OEM
These are times when consultations with what has come to be known in ModernSpeak as “stakeholders” is said to go on. I don’t know of an OEM which hasn’t already imposed travel restrictions or elevated guidance as a precaution for its employees, many of whom are nervous about what to think and how to act responsibly in the face of the media hysteria that is feeding the news cycle. But this high-dollar, wait-and-see game is being played with not just NY show organizers’ money, but millions from the OEMs. It’s a high-stakes game of “chicken” where everyone wants to see who’s going to blink first.
If the NY show goes ahead and opens its doors in the spirit of George M. Cohen’s belief “The show must go on,” will the OEMs show up in force? Those manufacturers are already stinging from the now-wasted resource lessons of Geneva, so they don’t want to be left holding the bag for a second round of impact from the virus’s effects. Even if NY chooses to go ahead and open, the possibilities of Mayor Bill DeBlasio shutting down the city’s mass transit systems will severely impede the public’s ability to make their way to the show.
I stand by my prediction that the show, despite Big Apple bravado, will not happen. OEMs will yet again have to turn to online streaming of media events to still get out their news, and thereby accelerate the move to shows as public-only expos, even after this entire COVID-19 “crisis” is long in our rear-view mirrors. Once the smoke clears, we’ll see a return to normalcy of launch programs, as the manufacturers will even more need to find ways of reaching a news-hungry consumer public.
Make no mistake, the risk management folks are driving the bus, even more than normal. And they are without question “belt and suspenders” kind of people.
What’s next? The Indy 500 is 75 days away…