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By Doug McLeod

Risk management at sports and entertainment venues has grown more sophisticated as stadiums and arenas themselves have grown more complex.

"We don't feel there is such a thing as a single-purpose stadium," said Robert Wilder, a senior underwriter with Philadelphia Insurance Cos. in Bala Cynwyd, Pa.

Keeping a venue in constant use creates its own risk management challenges, though. Venue operators need to keep an eye on the insurance provisions of multiple contracts with promoters and other parties involved in different events; manage security and crowd control with audiences that can vary widely from event to event; and minimize injury risks within the venue and adjacent parking lots.

"The more events you have, the more the exposure," said Robert Murphy, sports, entertainment and events industry practice leader at Marsh Inc. in Philadelphia.

Placing liability insurance for a stadium or arena may be the least of an owner's worries: While not quite as soft as it was two years ago, brokers and insurers agree the market for spectators liability coverage is still extremely competitive. (See related story at RiskandInsurance.com.)

Multipurpose venues are not a new phenomenon: Auditoriums in the early 1900s hosted events from symphony performances to ice shows, said Harold C. Hansen, director of life safety and security at the International Association of Venue Managers Inc. in Chicago.

The 1960s and 1970s saw a boom in stadium building that typically paired off local franchises of the four major professional sports, with baseball and football teams using one facility and basketball and hockey teams, another.

Many of these venues -- especially giant circular stadiums such as Veterans Stadium in Philadelphia -- aged rapidly and came to be seen as lacking in amenities for fans and athletes. Thus, a new building boom began in the 1990s, fueled by rising broadcast revenues and owners' desires to maximize income from luxury boxes and suites.

For Major League Baseball, this usually meant smaller ballparks with better sightlines, more premium seating and other amenities. "It's all about the fan experience these days," Murphy said, suggesting that many older facilities were too big. "If you have a 70,000-person stadium and have 40,000 people in it, that's a major issue."

With professional sports teams playing only a fraction of the year at home, though, finding other profitable uses for venues is a prime concern.

Newer baseball and football stadiums have been built with meeting rooms and event spaces to house corporate functions, trade shows, fundraisers and other events on nongame days.

Indoor arenas allow for even more variety. Along with four professional basketball and hockey teams, for instance, Staples Center in Los Angeles hosts concerts, stage shows, professional wrestling and the MTV Video Music Awards. The soon-to-be-completed Barclays Center in Brooklyn, N.Y., will feature basketball and hockey games, concerts, boxing, ice shows, equestrian show jumping and the Ringling Bros. Barnum & Bailey circus.

An Array of Risks

The variety makes for a wider range of risk management concerns.

A risk manager dealing with an array of events has to focus on contract management, said Brian Kingman, managing director with the entertainment unit at Arthur J. Gallagher Risk Management Services Inc. in Glendale, Calif. A venue owner or producer that deals with subcontractors for valet parking, sound and lighting services, transportation and catering has to be sure those parties are adequately insured and that their contracts include indemnification and hold-harmless provisions, he said.

Beverly Hills, Ca.-based Live Nation Entertainment Inc., one of the world's largest event producers, owns, operates or leases scores of music venues in North America, England and Europe. Where it controls a venue -- either owning it or leasing and then subletting it -- the company requires promoters or others using the space to carry adequate insurance, said Jan Berger, Live Nation's vice president of risk management.

Depending on the show, these requirements can include a package of general and auto liability and workers' compensation coverage, liquor liability and media liability coverage.

For shows with riskier elements, such as pyrotechnics, the company imposes stricter insurance and risk management conditions, he said.

Insurance requirements vary with different events and can sometimes come down to a judgment call by those involved, Marsh's Murphy added.

A venue owner, for example, may generally require promoters to have $25 million in liability limits for a particular kind of event, but if the promoter can only come up with $5 million, it becomes a business decision for the venue whether to go ahead with the event, he said.

"Limits become an issue, indemnification and hold harmless [provisions] become an issue," he said. "The complexity from a risk management standpoint is so much greater" when a facility is handling many types of events.

An arena that is continually reconfigured for different uses also carries more risk than a facility that stays largely the same for one type of event, experts said. At a multipurpose arena, banks of seats are moved; hardwood basketball floors are taken up to allow for ice rinks to be created; and stages and lighting are installed and removed. At Houston's Reliant Stadium, home of the National Football League's Houston Texans, the field is portable: It is made up of eight-foot long sod sections that can be removed to expose a concrete floor, adapting the facility for livestock shows and rodeos.

Regular changeovers can increase the potential for accidents and injuries: "Whenever you have to alter the stadium's configuration, you increase the exposure that something could go wrong," Wilder, of Philadelphia Insurance said.

Changing audiences also have to be taken into account, experts said.

The crowd at a hip-hop or rock concert or a mixed martial arts event is likely to be rowdier and more difficult to control than the crowd at a basketball game or an awards show.

"Your audience is continually changing, so how you respond to a 20-year-old at an electronic dance concert is going to be different from how you respond to an NBA fan," IAVM's Hansen said.

The differences underscore the importance of crowd management training for everyone from arena management to ushers, he added.

Crowd demographics can affect the severity of liability claims, Gallagher's Kingman noted. For example, LA's Hollywood Bowl, with its lineup of classical and jazz performances, tends to attract a well-heeled crowd, and injuries in this audience could prove more expensive than in other types of audiences, he said.

"All of the audiences are different, and you have different concerns, based on the audience you're selling to," Kingman said.

"Those demographics will certainly have an impact on claims," agreed Eric Hoffman, casualty segment director at Zurich Services Corp. Risk Engineering in Los Angeles.

One risk that got scant attention when many of today's stadiums were built is terrorism, and the risk continues to evolve. While an exposure for any stadium or arena, terrorism is a special concern for some, including those that hold political conventions and events, Hoffman said.

"The risk profile today," Murphy said, "is very different than when [some of] these venues started being constructed in the 1960s and 1970s. Nobody really thought about [terrorism] when these stadiums first started popping up."

Many facilities have taken anti-terrorism steps such as configuring parking lots to prevent vehicles from parking too close to buildings.

More recently, though, concerns about foreign terrorist attacks have waned somewhat as new worries have grown about a potential lone gunman firing an automatic weapon into a crowded arena -- a fear underscored by July's mass shooting at a movie theater in Aurora, Colo.

Stadiums and arenas typically impose security checks on incoming ticketholders, ranging from visual inspections and bag searches to metal detector screenings and patdowns.

"These venues are a lot more proactive in making sure weapons are not carried into the facilities," Wilder observed.

Managing terrorism and other catastrophic risks means that venue operators must develop and rehearse emergency response plans, experts said. These plans should define which arena employees are responsible for carrying out specific tasks, and should lay out protocols for evacuation, communicating with security personnel, spectators, municipal authorities and the press, Murphy said.

"Ushers, security guards, concessionaires, managers -- everybody has to be involved in that response," Hansen said. "You can't wait until the fire trucks roll in."

Venue operators haven't always been as prepared as many are today. Ten years ago, Hansen said, the emergency plan for many facilities was two words written on a piece of paper: "Call 911."

Since the Sept. 11, 2001, terrorist attacks, "we understand that bad things can happen," and emergency plans "are getting better, year by year," he said.

DOUG MCLEOD has covered the insurance industry for more than 20 years. He can be reached at riskletters@lrp.com.

September 15, 2012

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