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Insurance Assurance
Working with experts who possess both insurance and theatre knowledge proves to be the right combination to insure the drama stays on the stage
As of July 31, 2007, the Minnesota Fringe Festival was poised
for its 11-day festival, billed as the largest performing arts festival in
the Midwest and the largest nonjuried, uncensored Fringe in the United States.
With over 160 shows of mostly original work presented by a wide-ranging group
of local, national and international artists, attendance was projected to
surpass the 2006 turnout of 45,000.
Then the unthinkable happened. The I-35W bridge, connecting Minneapolis with
outer burgs, collapsed less than 24 hours before opening curtain.
“We had five to six venues of the 18 immediately impacted by the bridge
collapse, which is a major transportation conduit to the city,” recalls
Robin C. Gillette, executive director of the Minnesota Fringe Festival.
Gillette and organizers considered canceling the Festival but felt the panicked
city needed to come together and support each other—a need this Festival
could readily fulfill.
“Arts are huge part of making a community. Canceling the Festival didn’t
seem to be the right thing to do since Fringe is really about being proactive
and going forward,” explains Gillette. “We had to cancel only one
performance because the street to the venue was blocked by EMS personnel.”
And although alternative routes were quickly communicated and people turned
out, attendance was down significantly over the previous year’s number
with gross box office revenues down 21.8%.
And that was lost revenue. When your business is based on an annual event
there are few ways to make up the shortfall unless protected against such
a loss. Unfortunately, the Minnesota Fringe Festival didn’t have insurance
to guard them against uncontrollable, external forces like a bridge falling
down.
Adam J. Natale, director of member services at Fractured Atlas, a nonprofit,
national arts service organization based in New York City that provides many
theatre business-related services to artists and arts organizations including
access to low-cost insurance, recalls the loss felt by the Minnesota Fringe
Festival. “Not only was the bridge destroyed, but so was the Fringe's
box office. If they had had Business Interruption Insurance, they could have
had an easier recovery.”
And recovery is one of the main reasons to purchase insurance: to get protection
against the unpredictable. Many a theatre manager certain that disaster would
never hit has been shaken to the core by natural disasters, terrorism and
theft by a trusted staff member.
Coverage Considerations
By now you have the basics; perhaps you have a policy from your local insurance
agent covering the basics of general liability, your building/structure, contents
within the building, equipment, workers compensation, directors & officer’s
liability (D&O) and volunteer accident coverage. According to Brian Phoebus,
program director for the National Trust Insurance Services (NTIS), LLC, based
in Baltimore, Md., many companies offer a boiler plate of coverage including
general liability, property insurance and workers compensation. But the approach
to theatrical insurance needs to be more organic and take into account the
unique needs of performing arts companies and venues.
“We found that theatres, both new and old, are a very underserved market
segment. They are often insured with a local agent who has little experience
with insuring this type of business, which more often than not equals less
coverage, higher prices, and lack of understanding of the theatre’s operations
and how to properly insure them,” says Phoebus. “Uninsured claims,
not enough insurance to cover a claim, and high prices are the primary concerns
for theatres, both old and new. So, while basic General Liability and Property
coverage was present, what was missing for many of these theatres was coverage
for Volunteers, Umbrellas, Events, Specialized and Mobile Equipment, and insurance
solutions for the entities that rent the venue.”
Check Your Policy
Experts agree that the best coverage for your theatre should be secured from
an agent who has a handle on what it means to operate in the world of performing
arts. The professionals interviewed for this article felt special attention
should be paid to specific types of coverage as follows:
Crime coverage—
Ken Roberts, C. I. C., program manager for the American Association of Community
Theatres (AACT) Theatre Insurance Program, stresses the need to include Employee
Dishonesty coverage which needs to be written on a Crime form. “In far
too many cases, we’ve had theatres make claims when an employee or volunteer
[that] they trusted was making ‘unauthorized’ withdrawals from the
box office,” explains Roberts. “Too many theatres assume that the
theft provision in their property policy covers this, but it absolutely does
not.”
Phoebus also shares a crime coverage story in which a board member, to whom
he had never spoken before, contacted him explaining that the theatre’s
executive director had been fired, and was now being investigated for theft.
“Allegedly, he had been skimming from deposits, registers, and vault
drops over a period of about a year,” recalls Phoebus. “It is not
known exactly how much money went missing, and perhaps we will never know
for sure. What is known, however, is that this client had purchased Employee
Theft coverage and is working with the insurance company to settle their claim.”
Business Interruption—
Dick Schweickert of Schweickert & Company, who specializes in insuring
nonprofit and for-profit performing arts organizations nationwide, stresses
the importance of Business Interruption insurance for when your theatre is
put out of business through no fault of your own, as in the case of the Minnesota
Fringe Festival. “There are several different reasons your theatre may
be forced to close—perhaps the primary facility is damaged or civil authorities
shut down access to your venue.” explains Schweickert. “Either way,
this key policy can help your theatre get back to the point where it was before
it was put out of business.”
Restoration/Replacement—
Phoebus, whose company initially focused on creating insurance products and
programs specifically for historic property owners and preservation organizations
across the country, created the Historic Properties Program. In partnership
with the National Trust for Historic Preservation, NTIS has worked with the
League of Historic American Theatres to fine tune the parameters of this program.
Phoebus points out the special needs of historic theatres in that the policy
must provide coverage to restore a historic building after a loss, rather
than the standard “like, kind quality” definition of replacement
costs that gives no guarantees of exact replacement.
Personal Property of Others—
Roberts notes that this unique coverage is especially for community theatres
where property is oftentimes on loan for a specific show. “One of the
quirky things about community theatre is that they often have to borrow set
pieces for productions from their volunteers,” explains Roberts. “I
know my coffee table, as well as much of my own furniture has been used in
many local productions, and since they don't belong to the theatre, they wouldn't
be covered as theatre property unless the Property of Others coverage is included.”
Sexual Abuse & Molestation—
One can hope they never need Sexual Abuse & Molestation coverage, but
as Phoebus explains even the tightest-knit theatre groups can find themselves
unprepared when the unthinkable happens, as in the case of one small community
theatre. “When we gave them their first quote for coverage, we cited
that because they had summer and after-school theatre programs for children,
they had an exposure to loss that had not been covered by their previous insurance,”
recalls Phoebus. “Our quote included coverage for Sexual Abuse &
Molestation. The client insisted that it was not necessary, she knew everyone
in the theatre for years and they would simply never need it. But while we
honestly hoped that she was correct, we stood steadfast about the coverage
needing to be there, and convinced her to purchase it anyway.” Perhaps
the convincing came through a savings on her overall policy even with the
inclusion of this coverage. Several months later Phoebus received a frantic
call from the client that the FBI had come into the theatre, removed the computers
and some equipment belonging to an employee who had worked in the theatre
for years. The employee had been arrested by the FBI on charges related to
possession and distribution of child pornography.
Equipment Failure/Breakdown—
Often overlooked as part of property/casualty coverage, Equipment Failure
is likened to accident, health and disability insurance for your equipment.
Equipment Failure coverage would protect you if you get a power surge that
fries your computers or perhaps an electrical short that wreaks havoc on your
lighting system. Frequently an Equipment Failure policy can also include business
interruption coverage which should protect you from any loss incurred during
your downtime. Be sure to assess any equipment that may not be on site but
critical to your business operation like an independent Internet Service Provider
(ISP) charged with hosting your Web site. Make sure that they have both property/casualty
and equipment breakdown coverage in case they have any equipment failure.
Employment Practices Liability—
Schweickert stresses the importance of Employment Practices Liability insurance
to protect theatres from work-related discriminatory claims made by employees,
former employees and potential employees. It is estimated that three out of
five firms will be sued by an employee and Schweickert notes this is an area
with some of the largest claims and where liability cases against employers
are on the rise. “This coverage is typically part of a Directors and
Officers Liability policy and protects theatres from discriminatory claims
(age, sex, race, disability, etc.), sexual harassment and wrongful termination,”
says Schweickert.
When Talking to Your Agent…
Whether you have a long-standing relationship with your agent or not, it is
good practice to annually review your policy with them for any changes to
the way you run your theatre. Natale recommends you ask your agent the following:
• Do we have no deductible or a very low deductible for our general liability coverage?
• Do we have a minimum of $1 million per occurrence limit for general liability coverage? $2 million aggregate or higher ($3 million would be optimum)?
• Does our insurance carrier have an A, A+ or A++ Best Rating?
• Do we have adequate coverage for performers (worker’s compensation, volunteer accident or medical expense coverage)?
• Are all of our productions/performances and activities covered (be specific)?
• Do we have coverage for our equipment/ scenery/ props/ costumes whenever necessary? What if they are stored off site?
Expert Advice
Working with professionals that understand your theatre business can go a
long way in making sure that you have the right coverage. They can anticipate
what your needs are and even act as a consultant to save you money on your
insurance. Schweickert recalls working with a black box theatre and saving
them $30,000 on their policy by coming up with a solution to appease a Worker’s
Compensation inspector. By working with engineers to develop a harness safety
system to protect workers from potential falls while working with a sixteen-foot-high
lighting grid, Schweickert explains that the safety vests and cables were
truly an added protection. “Six weeks after everything was installed
someone fell and went unhurt due to the new safety system we installed,”
says Schweickert.
Roberts offers specific advice to community theatres who feel they can’t
afford to purchase coverage. “We look at it from the opposite perspective—purchasing
insurance could mean the difference between continuing to operate and closing
down,” explains Roberts. “We don't believe they can afford not to
purchase it.”
Phoebus encourages theatres to talk to experts who specialize in the theatre
industry stating, “You will often find not only better coverage, but
also better pricing, and a better understanding of your risks and insurance
needs.” Natale agrees with that advice and adds “We know that a
lot of arts administrators don't like dealing with insurance, but we can help
with the process. Even if you've been with the same insurance company for
years, you could be wasting hundreds or thousands of dollars on your current
policy! That money could be spent on performances and performers!”
And finally, Schweickert feels theatres should only work with brokers who
specialize in Arts & Entertainment. When seeking new quotes, Schweickert
recommends that theatre managers share their current policy with bidding companies
so that you have a starting-off point for a conversation. “Take your
policy to them and show them the coverage you already have,” he advises.
“Some theatre managers feel it is unethical to share their policies with
other insurance agents, but it really is the best way to make sure that the
theatre is getting the appropriate coverage.”
To continue the conversation on insurance coverage, visit www.dramabiz.com/forum.
