The unfortunate need to address mass shootings in contracts

It is truly a sad commentary on our society that we have had so many mass shootings in our country in recent years. The number of mass shootings in the U.S. is and tracked, and the statistics are startling: Using one definition of "mass shooting" ("firearm violence resulting in at least four people being shot at roughly the same time"), there have been 2,128 mass shootings since 2013, roughly one per day. But don't get me started on the need for gun elimination in a political climate where we can't even get gun control.

For those in the live entertainment business, where venues have become targets, there has been a need to address operational issues, contractual relationships and insurance issues. This article is a discussion of those areas where the possibility of mass shootings gets factored in.

The deadliest shooting to date is the horrific mass killing Oct. 1, 2017, perpetrated by a lone gunman, firing round after round from his hotel room on the 32nd floor of the Mandalay Bay Hotel in Las Vegas, aiming his weapons on the unsuspecting concert goers attending the Route 91 Harvest Music Festival staged below the shooter's roost. When the dust settled, 58 people were dead (plus the shooter) and 851 injured.

In November 2017, litigation was filed on behalf of 450 of the victims of the shooting. The lawsuit claimed that the Mandalay Bay Hotel was negligent in permitting the shooter to bring his massive number of weapons into the hotel.

In July 2018 MGM Resorts International counter-sued, but not for money; the hotel claimed that it had no liability of any kind for the attack as a matter of law. MGM based its countersuit on a federal law passed in the aftermath of the 9/11 attacks. That law is the Support Antiterrorism by Fostering Effective Technologies Act, aka the Safety Act. To qualify under that law, MGM would have had to show to show that the shooting qualified as an "act of terrorism" under that statute's definition. If successful in raising the Safety Act as a defense, MGM might escape liability for the massacre.

Before the case reached a final result, and with no adjudication of fact or law on the applicability of the Safety Act to the MGM case, the case was settled by a payment of approximately $800 million to the claimants.

In addition to the potential defense afforded by Safety Act, the insurance landscape that provides coverage for live events has shifted due to the reality of the increase in violent attacks at such events. Before 9/11 commercial insurers did not generally charge extra for terrorism coverage and did not generally exclude it. It. But the $40 billion in losses from 9/11 changed all of that. After that insurers and reinsurers began excluding terrorism from coverage. The insurance industry simply stopped offering the coverage, in many cases, even for an additional fee. This situation caused disruption in many industries including the business of presentation of live entertainment performances where a balanced insurance/indemnify program together with a comprehensive safety and security plan is the only way to manage risk.

In the aftermath of 9/11, Congress passed legislation creating a program of insurance that provides for public and private compensation from certain insured losses from acts of terrorism. To be covered the acts of terrorism had to be certified under the terms of the act. This act was the Terrorism Risk Insurance Act of 2002. The act is administered by the secretary of the Treasury with the assistance of the Federal Insurance Office. The program was temporary, but it has been extended three times by subsequent legislation and currently has an expiration date of Dec. 31, 2020.

The act only covers acts that are certified. Noncertified acts are not covered. An event is either certified (or not) by the secretary of the Treasury, the secretary of state and the attorney general of the United States. Certification involves a determination that the subject event qualifies under all of the following characteristics: (a) an act that is dangerous to human life, property or infrastructure; (b) an act to have resulted in damage within the U.S. (or outside the U.S. in the case of a U.S.-flagged vessel, aircraft or premises of a U.S. mission); (c) the act must be committed as part of an effort to coerce U.S. civilians or to influence either policy or conduct of the U.S. government through coercion; (d) the acts can include both foreign and domestic terrorists and (e) the act must cause property and casualty losses in excess of $5 million, provided however, that acts caused by war declared by Congress do not qualify. The certification authority may not be delegated and certification of an act of terrorism is not subject to judicial review.

The financial assistance allowed and indeed required insurers to offer what has become known as TRIA coverage for certified acts. The distinction between a certified and noncertified act is still relevant to the insurance landscape, since, although the act required insurers to offer TRIA coverage for certified acts of terrorism, some insurers exclude coverage for noncertified acts. Therefore, businesses purchase noncertified terrorism insurance, which is intended to provide coverage for events that do not qualify as certified under TRIA.

Given the reality of the occurrence of these violent, unpredictable acts, what has been the response of concert producers to the Las Vegas event and other mass shootings in terms of risk management, operational concerns and contractual obligations among the variety of parties promoting and presenting large outdoor and indoor events? There is case law that has held that a party is not liable for the unanticipated criminal acts of third parties as not foreseeable. But in the current climate it is difficult to argue that such events are not foreseeable.

Anticipating the possibility of terrorism, whether international or domestic, has been a business reality in the business of presenting live entertainment since 9/11. Accordingly, festivals have increased security, thorough screening processes including, metal detectors, use of metal detecting wands, and a requirement that patrons only bring clear plastic bags to the event for ease of inspection. All shows and live events include in the planning processes, security, safety and evacuation plans as necessary planning tools. At the same time, steps are taken to prevent vehicles from entering the perimeter of the premises as has occurred at events that have had "vehicle ramming attacks." In addition, promoters must be also diligent about the possibility of attacks from the air including utilizing the use of drones. And so, in the drafting of safety and evacuation plans, promoters work closely with private security companies and local police departments, and other law enforcement agencies, in order to be prepared for the unthinkable.

Venue agreements typically have indemnity and insurance clauses that require indemnity of the venue from any loss, damage, claim or liability arising from the conduct of the event and insurance to back up that indemnity. From a promoter's perspective, the contract should be limited to liabilities caused by the promoter, and the promoter will seek to negotiate a force majeure that relieves the promoter from liability for an act of terrorism that causes a suspension of performance or a complete cancellation of the event. But of course, such a clause may be of no avail, if the shooter was allowed into the event due to negligence in the provision of security, for example.

From an insurance perspective, live event promoters make sure that their commercial liability coverage does not exclude non-certified events of domestic terrorism and take out the available TRIA coverage for certified events. Because of the very real possibility that an active shooter situation may disrupt the schedule of an event or even cause the cancellation of the event, promoters will take out what is in the industry commonly referred to as cancellation insurance. Many artist agreements have provisions that say that if an artist is "ready, willing and able to perform" that they are paid for the performance whether or not there is terrorist event that causes the cancellation and notwithstanding a force majeure clause that otherwise may give relief from certain causes of cancellation. Cancellation insurance provides the financial coverage for such an obligation.

Promoters, venue operators, artists and everyone involved in the presentation of live entertainment performances all want patrons, artists and other event participants to be safe and stay safe; but the grim reality is that we have seen and continue to see the very worst in mankind in the form of the characters who plan and execute these heinous crimes by attacking gatherings of people who came together only for the singular purpose of enjoyment of a live entertainment performance. The gun violence has got to stop; getting rid of the guns would be a start.

Though written in the backdrop of the unpopular Vietnam War, Steven Stills' words still ring true:

There's something happening here /

What it is ain't exactly clear /

There's a man with a gun over there /

Telling me I got to beware /

I think it's time we stop, children, what's that sound /

Everybody look what's going down / ...

We better stop, hey, what's that sound/

Everybody look what's going down

-- "For What Its Worth," Buffalo Springfield 