Reducing Event Liability RiskNovember 1, 2017

Experts Weigh in on Critical and New Legal Pitfalls, From Event Security to Marijuana By
November 1, 2017

Reducing Event Liability Risk

Experts Weigh in on Critical and New Legal Pitfalls, From Event Security to Marijuana

 When legal issues impose themselves on meetings and events, rarely do they go to court. Instead, they are resolved by negotiations between the parties. That means that the clarity and due diligence applied to the issues beforehand, especially as they are reflected in contracts, will be the determining factor in who wins and who loses. And in the end, disputes are not remembered as legal issues. They come down to dollars and cents in terms of liability.

That’s why it is critical, expert attorneys say, for meeting planners to assess the implications of the decisions they make.

The Big Risks Today

Joshua Grimes, a Philadelphia attorney who specializes in meeting-related legal issues, cites event security and the minimization of risks as the single most important topic of current discussion.

“What many meeting hosts and planners need to acknowledge is that they need to be more careful in planning for potential risks,” Grimes says. “And by that I mean not just hurricanes or somebody with a gun, but the full range of the things that could happen.”

And related to that planning, he adds, is the importance of making sure you have the proper insurance coverage in place for your event and that it covers everyone involved in the meeting. “In addition to that, you need to acknowledge that if something happens, it is very likely that all parties involved in the planning of the meeting will be sued,” he says. “That means you also need to be prepared to handle that.”

The best current example of such risk is the October 1 Las Vegas shooting  from Mandalay Bay into an outdoor crowd.

“The hotel has been sued,” Grimes says. “The concert organizer has been sued. And my understanding is that the security company has been sued. So all of those parties are facing major legal liabilities. And meeting planners need to understand they face the same kind of potential exposure every time they hold a meeting.”

Unfortunately, Grimes says, not all meeting planners comprehend the full range of the legal risks they face in planning an event. “In today’s world, a meeting host and planner have to plan for every conceivable contingency — and have insurance coverage in place to protect themselves. And you need more than just general liability insurance. You need alcohol liability coverage, professional liability coverage, auto coverage if anyone will be driving a car during the meeting. And one thing I see often is that meeting planners do not adequately insure their meetings. One example of that is that they do not thoroughly describe to their insurance brokers everything that will be going on at the meeting. They describe it in a way that ascribes less risk than actually exists.”

The byproduct of such oversight could be costly. “If someone gets hurt,” Grimes says, “and the insurance company finds that you did not properly describe everything that would be going on, so that they were not able to thoroughly assess their risks when they agreed to insure the event, then they might deny coverage if something goes wrong.”

Force Majeure

Force majeure clauses remain a major legal issue, especially in light of the three major hurricanes that hit Texas, Florida and Puerto Rico in late summer, says Atlanta-based John Foster, who has represented meeting industry clients for 40 years.

“In all three of those locations, we saw major damage to some hotels,” Foster says. “And I’ve already gotten phone calls from (meeting hosts or planners) who are concerned about meetings scheduled in those destinations in the near future. And some of them have been told, ‘We had a little damage, but we expect you to show up.’ And others are saying, ‘We had some damage, and we don’t want you to show up, so we’re invoking the force majeure clause in our contract.’ And in both those cases, those situations could present problems or legal challenges for the companies holding the meetings.”

Resolutions of force majeure disputes are based on one of three basic standard, Foster says. “One is that performance of the contract is impossible,” he says. “The second is that it is ‘impracticable.’ And the word is impracticable, not ‘impractical.’ That means it’s substantially and materially more difficult to perform than originally anticipated. And the key factor there is that the situation could not have been foreseen at the time the contract was executed. The third factor is called ‘frustration of purpose.’ That’s where the purpose of the event has been ‘frustrated’ to the point where it does not make sense to go through with the contract. An example would be a meeting or event where you’re having a big golf tournament as the highlight, but the golf course has been destroyed in a hurricane or earthquake. That means the essence of your meeting has been frustrated.”

The key legal element in a frustration of purpose claim, however, is that the purpose — the golf tournament or whatever it might be — must be clearly spelled out in the contract, Foster explains. “In other words, the contract has to state that the purpose of the meeting is to bring people from all over the U.S., or from around the world, to the hotel in order to host an event that culminates with a major golf tournament on a certain date.”

Force majeure issues “are rarely cut and dried,” says St. Simons Island, Georgia-based Tyra Hilliard, another highly regarded meeting industry attorney who often speaks on behalf of organizations such as MPI or at events such as IMEX. “For example,” Hilliard says, “just as Hurricane Irma was heading to Florida, I had situations where hotels were refusing to let my clients invoke force majeure until the day the hurricane actually hit. And they were saying that in spite of the fact that states of emergency had already been called at the federal and state levels. But the hotels were basically saying ‘our convention facilities are hurricane-proof and our airport is open, so come on down tomorrow.’ So those issues are almost never easy to deal with.”

Attrition and Cancellation

Just like force majeure, attrition and cancellation are hotly debated and contested issues that are always on the radar of meeting hosts and planners. And in terms of controversy and enforcement by hotels, they tend to cycle back and forth depending on whether planners are facing a buyer’s market or a seller’s market, Foster says. In the current seller’s market, hotels often act in the belief they have the upper hand when it comes to enforcement.

The essential legal principle is that under the law, a hotel cannot assess a penalty for attrition or cancellation, Foster notes. Their only recourse is the collection of actual damages that can be demonstrated.

“The key thing with regard to both attrition and cancellation is you have to be clear about how damages will be calculated by the hotel,” Foster says. “There are different ways of doing it, and some clearly favor the hotel. There are also ways to make sure that the group gets credit for everything it should in making those calculations, but that the hotel does not want to give credit for because they reduce the damages the group has to pay. The important issue from the group’s perspective is whether you have a vague clause in the contract that just says you have to pick up 80 percent of your rooms, or you have to pay. That doesn’t really say a whole lot, because there are a number of things that have to be factored in.”

His cancellation and attrition provisions are a page long. “I use a precise formula that uses several steps to do the actual calculation of damages,” he says. “That means that after the meeting, it’s just a matter of plugging in the actual numbers. But both sides have already agreed on what the rules are and how the formula works.”

Hilliard agrees with Foster that attrition and cancellation clauses are being strongly — and expensively — enforced in the current market. “And one reason for that is that I see a lot less of the old ‘relationship-based dealings,’ ” she says “And because we are in a strong seller’s market for the hotels, they think they get away with strict enforcement. But I also think the hotels that are doing that will regret it when the market turns again (to a buyer’s market), which it eventually will.”

Hilliard also concurs with Foster’s assessment that precise and mutually agreed-to calculation of lost profits  by the hotel is the essential metric for negotiation. “And even with that, I try to sit down and see if I can come up with the same dollar figure the hotel did,” Hilliard says. “And nine times out of 10, I can’t, which tells me the hotel has thrown in things like anticipated ancillary spend by the group.”

In order to best represent the interests of her clients, she includes an audit provision in her contracts so that such fiscal disputes can be resolved based on real financial numbers and not just a negotiating position.

Attrition and Cancellation

It comes as a surprise to many meeting planners to learn that the hotel can cancel a meeting, even days before the event, if they book a larger or more profitable meeting for the same dates.

Unfortunately, Foster says, many planners are unaware that could happen — and that it’s legal, subject to a fair payment of damages, if any, to the company whose event was cancelled.

“The only issue is what, if any, damages are suffered by the company holding the original booking,” Foster says. For example, if the company can rebook a comparable hotel in the same destination for the same dates, at the same cost, there are no damages and the hotel faces no liability.

“The company is only entitled to the difference between what it would cost them to transfer the meeting from the original hotel to the new hotel,” Foster says. “For example, if there is a difference in the cost per night of the rooms, then the company is entitled to that per-night difference times the number of room nights included in the meeting.”

‘White Label’ Apps and Drones

While old issues such as force majeure and attrition/cancellation persist, new legal issues are beginning to emerge.

“One issue that is just now being talked about is the fact that Apple has recently started to deny approvals of what they call ‘white label’ apps in their apps store,” Hilliard says. “And it appears that the definition of ‘white label’ apps includes some of the kinds we use in the meeting industry. So that could become a big issue for the industry and the companies that create those apps.”

So-called white label apps are rebranded versions of another company’s product to make it appear to be their own.

Another issue that is now gaining attention and causing discussion is drone photography and videography at events, Hilliard says. “That is essentially a privacy issue,” she says. “So what I’m seeing now is that hotel lawyers are scrambling to figure out what their policy is. And I know of at least one example where a hotel recently put in a contract that drone photography would not be allowed over the resort’s property at a meeting because of issues related to other resort guests. It’s one thing to take pictures of your own attendees. It’s another thing entirely to take pictures of resort guests who are not your attendees. That’s potentially a privacy issue. For example, what if your drone flies by the window of a guest who is not an attendee at your meeting and it happens to take a picture or record video of that guest undressing.” She cites Fox sportscaster Erin Andrews’ case as an example of potential liability.

Another example in the era of scandals related to viral photos or videos, Hilliard says, is a meeting attendee who happens to be caught in a photo or video near a non-attendee guest doing something illegal or socially unacceptable — thereby causing potential embarrassment or legal liability. And although the legal issues are still somewhat vague and untested, their gravity will only increase as the use of drones for commercial and private purposes expands. As a result, Hilliard says, hotels, other venues and vendors are starting to discuss actions that will protect them. And so far, those discussions are centered on banning drone photography or videography as the only sure protection.

Legalized Marijuana

As more states legalize the recreational use of marijuana, with California doing so effective January 1, its presence at meetings will become a legal issue for some companies, Hilliard says. As a general principle of law, a company cannot punish a meeting attendee for doing something that is legal, meaning that in Colorado and the other states with legal marijuana, smoking a joint is the same as having a drink at the bar. “So the kinds of things I’m starting to see,” Hilliard says, “include companies suspending their drug-testing policy for at least 100 days after a meeting in Colorado or one of the other states.”

Otherwise, an employee fired for a failed drug test after a meeting in a destination where recreational marijuana is legal could sue the company — and win in court. “So then,” Hilliard says, “the question becomes whether some companies stop meeting in those states to avoid the issue.”

Grimes also raised legalized marijuana as a legal issue that will now gain momentum. “There is a lot of uncertainty, because no one knows yet how legal marijuana use is going to relate to accidents and injuries and damages that result from marijuana use at meetings,” Grimes says. “So what I recommend is that meeting planners treat it like alcohol. For example, if you know some people will be using marijuana at your meetings, you need to take measures to prevent someone getting in a car and driving or doing something else that is risky.”

The question, of course, is how a planner could anticipate that some attendees will use marijuana in their free time. “And there are now companies in Colorado that will deliver to your hotel,” Grimes says. “So my recommendation is to set a rule that will not permit those companies to deliver marijuana to your group event. I would also ask my attendees not to use marijuana at my event. At the least, that means that if something happens, you could say you made the request. Otherwise you could face legal liability.”

Because there are so many old and new legal issues that relate to meetings, Foster recommends that meeting planners engage an expert attorney for guidance rather than relying on in-house counsel who generally are not well-versed in the legal implications of such issues.

“A lot of companies just think that their own in-house attorneys can handle these things,” Foster says. “And the fact is that in most cases, they are not experts on the legal issues that relate to meetings. And when there are disputes after the meeting, you learn quickly that it’s going to come down to how clear the language was in your contract. That’s what is going to determine how the settlement negotiations play out. So you better have a good lawyer guiding you when it comes to those provisions. After the fact, it’s too late. The thing to understand is that if you do not clearly understand the legalities up front and make them work in your favor, then by default they will work against you if anything goes wrong.” C&IT

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