Does Your Force Majeure Clause Cover the Coronavirus?

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Does Your Force Majeure Clause Cover the Coronavirus?

By Maria Lenhart | Feb 26, 2020

When it comes to protection from a disastrous situation such as COVID-19 (the coronavirus) causing loss of attendance or the cancellation of an event, meeting industry attorneys say the starting point is the force majeure clause in any contract with hotels and meeting facilities. 

In our recent survey of meeting professionals, 73 percent of respondents said they don't know if their event cancellation insurance covers communicable diseases (7 percent said yes and 20 percent said no).

“These clauses need to cover every situation outside of the contracting parties that might cause the planner to cancel the meeting,” says Joshua Grimes (MPI Philadelphia Area Chapter) of the Grimes Law Offices. “It may also allow for a meeting to be reduced in appropriate circumstances, rather than a total cancellation.”

Grimes notes that a typical force majeure clause may not fully protect the planner from attrition penalties in the case of a health crisis.

However, Grimes notes that a typical force majeure clause may not fully protect the planner from attrition penalties in the case of a health crisis.

“Some force majeure provisions may cover a health concern like coronavirus, but they usually do not contemplate a situation where attendees may not want to travel out of fear of catching an illness that is centered in another location,” he says. “Similarly, force majeure clauses usually do not anticipate that some attendees may be banned from leaving their countries.”

In these cases, it’s crucial for planners to have a dialogue with their hotels and other vendors, he adds.

“If one group is thinking of canceling an event, others probably are as well,” Grimes says. “The venues and vendors may have a suggested solution that would work for all involved. Some may allow the planner to cancel; other solutions might involve permitting a smaller meeting without attrition damages or allowing the meeting to be postponed to a future date without liability, with all group costs transferred to that rescheduled date.”

If no resolution can be found through discussions, the next course of action is to read the contract carefully, possibly with an attorney, to see if there are provisions or nuances that would allow the planner to get some relief, Grimes adds.

"If the force majeure clause excuses performance ‘in part’ based on an unforeseen occurrence, the planner may have a contractual right to reduce the event without liability,” he says.

“For example, if the force majeure clause excuses performance ‘in part’ based on an unforeseen occurrence, the planner may have a contractual right to reduce the event without liability,” he says.

Attorney Barbara Dunn, partner at Barnes & Thornberg LLP, stresses the importance of including a “catch-all” provision in the force majeure clause that covers anything that prohibits fulfillment of the meeting.

“For example, the clause may not mention infectious disease, but it does say ‘any other cause beyond the party’s control,’” she says. “We can never list all the specific things that can go wrong.”

Another point to consider is what protection may be offered under the local laws in the meeting destination, a point addressed in the “choice of law” clause in contracts, Grimes says.

“This clause states which jurisdiction laws would govern the contract,” he says. “Some states and countries have statutory force majeure provisions that would help in something like a coronavirus situation.”

Visit our COVID-19 page for resources and news about the coronavirus.

 

Author

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Maria Lenhart

Maria Lenhart is a former editor of multiple meeting and event industry publications, and has won numerous awards for travel writing, including a prestigious Lowell Thomas Award from the Society of American Travel Writers.