Burnt by the Fyre: lessons in festival insurance

In April 2017 the biggest upcoming event on the minds of music festivals fans was the much-heralded Fyre Festival in the Bahamas.

It was billed as a new kind of music festival, featuring a long list of well-known bands, with luxury accommodation, all on (as was prominently mentioned on their adverts) an island once linked to the notorious drug lord Pablo Escobar.

Tickets were on sale for up to $100,000 each, although most attendees paid far less. It was supposed to be not so much an event as more an unforgettable experience.

For those who arrived on the island of Great Exuma on April 28, 2017, it was soon apparent that it was indeed unforgettable—but for all the wrong reasons. The headline bands had cancelled, there was little water, few portable toilets and the ‘luxury accommodation’ turned out to be disaster relief tents.

To add insult to injury the festival had no links to Escobar—the organisers had been unable to secure permission to hold it on the island of Norman’s Cay, which had been owned by a member of Escobar’s cartel, but someone had forgotten to remove the claim in the adverts.

Tents and mattresses were soaked with rain water from a storm that hit the site, the food was minimal at best, baggage went missing—all accounts agree that the festival was a disaster, with the only music being played by a local band before it all collapsed and the guests had to be flown out.

It became apparent that the event had been marketed at short notice, leaving far too little time to organise the infrastructure and staff it required.

Fyre Festival has become a byword for overambitious concepts meeting cold hard reality, with one of the organisers, Billy McFarland, now serving a six-year prison sentence in the US for wire fraud. Almost two years later there are still lawsuits pending on the financial fallout from the failed event.

The autopsy into the festival has been a long one in the eyes of the public and there have already been two documentaries made into why it all went so horribly wrong.

However, one thing does stand out. The organisers either did not get or were unable to obtain (the details are still uncertain even now) event cancellation insurance, a key element of any major event run by a competent management team.

Key questions

It’s worth asking at this point whether the event could have been insured at all. According to Lucy Evans, claims manager at specialist insurer Event Insurance, the answer is yes—with caveats.

“In theory, for the most part, there would have been elements that would be insurable, if McFarland had acted legally and not committed fraud,” says Evans.

“It is certainly possible to insure for the cancellation of an event due to adverse weather, which it may have come down to with regard to the storm.  But because of the fact that the organiser miss-sold the event and lied to the staff and attendees the event wouldn’t be insured.

“If it had been completely above board and was genuinely going to be the party and festival it claimed to be, then aspects such as the non-appearance of performers could be considered.

“Liability could have been considered if they had been more prepared with regard to things such as the accommodation and toilet facilities.”

According to Evans, music festivals are the bread and butter of companies such as Events Insurance but it is essential that organisers are responsible, careful, honest and organised in the way they plan events.

She points out that insurance for an event is very important, as it provides peace of mind to the organiser that in the event of a valid claim, the policy is there to support them and help them when they find themselves in a very difficult situation.

If cancellation is the main issue, it can make all the difference and have a huge impact, often being the make-or-break factor as to whether such events can go ahead in the future, and sometimes even whether the company, group (or individual) can survive the fallout from not proceeding with the event.

What is covered

Evans adds that insurance helps maintain relationships, certainly between the insured and the venues and also with contractors who depend on the event going on as planned.

“Quite often suppliers don’t receive payment until after the event has taken place, so without these funds, many will be out of pocket,” says Evans.

“It is therefore worth considering that it is not just our insured who is depending on the event being a success. From a liability perspective, it ensures that if a serious injury is sustained due to the client’s negligence, the insured has the legal expertise to assist them in the matter and deal with the consequences.”

Evans explains that there are many different factors to be considered when underwriting a risk. Event Insurance generally looks at the size of the event, the location, how many people the organiser is responsible for, how much liability cover they need, and what plans are in place to ensure the health and safety of people attending the event, staff and contractors, etc.

The company also considers claims history and also the activities taking place at the event.

“As an event insurer, we have found that the most important aspects to cover are the liabilities, both for the public and under employers (which covers volunteers, helpers and paid staff), cancellation cover and equipment cover,” says Evans.

“The liability aspects are there to protect the insured so that in the event an incident happens and a person is injured, or third party property is damaged due to our client’s negligence, the policy can look to defend them in a court of law or help pay settlements to a claimant.

“This can run into thousands of pounds, so it is very beneficial to the client to make sure this is in place.”

She adds that cancellation cover is also essential if the client incurs costs to put on an event and that it helps the client settle costs to suppliers and performers that were contractually due, helping to maintain those relationships for future events.

The equipment cover that insurers provide is for hired, leased or owned items, so that if equipment is damaged, it helps the client with the cost of replacing or repairing the item. Evans stresses that the cost of hiring an item is generally substantially less than the cost of replacing the whole thing if damage is sustained.