Terms & Conditions Power Panel
Panelists:
Jason Bernstein, AEG Presents
Berkeley Reinhold, Business & Law Office of Berkeley Reinhold
Tim Epstein, Duggan Bertsch, LLC
Brent Daughrity, Anderson Benson Insurance
Moderated by:
Pam Matthews, IEBA
IEBA’s Pam Matthews opened this session by welcoming her panelists and making the blanket statement, “None of this should be construed as legal advice. It is information and insight.”
“Although, if any of my clients are in the audience,” Epstein chimed in, “I will be billing you for this.”
Matthews set the panel agenda: “A lot of what we will talk about today is allocation of risk and transferring risk through insurance. Insurance can cover attorney fees, court costs, settlements, and judgements.”
Additional Insured
IEBA’s Pam Matthews opened this session by welcoming her panelists:
Jason Bernstein, Senior Counsel for AEG Presents: “I represent Goldenvoice and their festivals, Louis Messina’s office, and Madison House. I do a little bit of everything – contracts, insurance claims, cease & desist, NDAs, the whole gamut.”
Berkeley Reinhold: “I am an entertainment attorney. I started my career at William Morris, running business affairs for the music department for about 20 years. I now represent festivals like Lollapalooza and have lots of clients on all sides of the equation – vendors, artists, and so forth.”
Tim Epstein, Duggan Bertsch in Chicago: “I serve as outside general counsel to about two dozen promoters. A lot of that work is concentrated in the festival space, but I have non-music clients like Maker Faire and Refinery29. I also represent some interests on the ticketing side, and sports groups within my law firm as well. Some examples of clients in the music space would be Bottlerock, Pitchfork, Life is Beautiful, Riotfest. And I still teach sports entertainment law. It’s been 8 years now.”
Brent Daughrity with Anderson Benson Risk Management and Insurance in Nashville: “I primarily work with the entertainment industry. I work with festivals, artists, vendors, kinda everything that touches a festival or an artist.”
Matthews set the panel agenda, “A lot of what we will talk about today is allocation of risk and transferring risk through insurance. Insurance can cover attorney fees, court costs, settlements, and judgements. One of the topics that we talked about last year is still confusing: additional insured.”
Daughrity began, “Additional insured status is an endorsement that is granted by the CGL form of an insurance policy. Pam is talking about a certificate versus an additional insured endorsement. A certificate is just a snap shot in time. It does nothing for you. It’s probably what all of you get all the time. Unless you’re obtaining the actual additional insured endorsement, you really don’t have anything. These certificates are obtained months prior to an event. You could get in a situation where somebody missed a bill and there is no insurance when you thought there was. Having that actual physical endorsement is a best practice.”
“That endorsement is going to be in form of a blanket additional insured endorsement,” Epstein continued. “Basically, whenever you’re in a written contract with someone that endorsement becomes effective. Tell the underwriter to give you that additional insured endorsement, which you can use for anyone at no additional cost.”
“In a contract, there are two main points that govern liability: indemnity and additional insured,” Reinhold said. “If you just have an indemnity provision, you have to enforce that indemnity. If you are additionally insured, you can tender the claim to their company and it’s a lot easier. That is why people like to have it.”
Bernstein added, “I’ve had people hesitate to list us additional insured because they say that increases their exposure. It doesn’t. The named insured owns the insurance policy. You can literally list every single person in the world and the carrier is still only responsible for what the named insured does. They’re not going to extend coverage for negligence of vendor.
“After I convince them that it is okay to list me as additional insured, someone goes ‘It’s going to cost me a huge amount of money.’ If you are doing a minimal amount of work for a broker, they might charge you $10 as a document fee. It should be free. It doesn’t cost a dime and it doesn’t create any new liability. If anyone tells you that listing you as additionally insured is a problem, the problem is them.”
“There are different ways you can add someone as an additional insured,” Reinhold added. “I get this question a lot – the difference between an additional insured and additional named insured. You’ll see a certificate of insurance with ‘You’re an additional insured with respect to my sole negligence.’ Or ‘You’re an additional insured with respect to my acts or omissions.’ With additional named insured, you are covering that person for their negligence and it’s not something that you would want to do. Leave it as an additional insured.”
Epstein: “The current state of case law relative to insurance coverage on additional insured is if you don’t have privity of contract – that means direct contractual privity with that party – it is likely that additional insured status is void. So as much as possible, what I would advise my clients to get into as many primary contracts as possible, if you care about the additional insured status. Saying all subcontractors need to name me as additional insured is fine. But it’s likely the carrier is going to decline that claim because you don’t have direct privity of contract.”
“When the subcontractor is security, how are we handling additional insured?” asked Matthews.
Bernstein answered, “As a promoter, I don’t know all of the nooks and crannies of a venue or what is/isn’t safe. So, we usually have a provision that says ‘Except with regard to security that we (as the promoter) hire, we expect the venue operator to engage a security company and cause them to put in a security plan to protect people both inside and outside the venue and the areas that they can control. We are not responsible.’ Then the venues go, ‘Depending on what you do, you may or may not be responsible.’ And I say ‘First, your security company needs to learn to say no and to control themselves appropriately no matter what the situation.’ But more than that, I say ‘When you contract with your security provider, tell them to indemnify you, the promoter, and anyone for their actions. Just like we will list the world as additionally insured.’ Staff Pro and Contemporary should be happy to reciprocate because they are only responsible for what they are responsible for. As a venue operator, we do the same thing. I don’t want the band to tell me everything that’s happening; it’s my house and I rule the roost. The venue operator gets to be in charge.”
Epstein responded, “Lately, I’ve seen ‘We are not responsible for overdoses. We are not responsible for spotting an overdose. We are not responsible for terrorism.’ The exclusions I see now on security contracts are crazy. I strike all of them. Even if there is insurance coverage, don’t give an insurance company an out over exclusions. You don’t want to get into a coverage battle.”
“That’s a tough class to insure,” said Daughrity. “Make sure the security firm has proper coverage. I even go a step further because a lot of carriers are either silent or exclude assault and battery on the security policy. You should have a lawyer look at the security contract. Spend the money. If you’re only going to have one contract reviewed, have your lawyer look at security not the artist contract.”
Matthews shifted the conversation to additional insured and sovereign immunity and asked, “Can a tribal nation name you as additionally insured? Can the federal government insure you? What about a state or a municipality?”
“The basics behind sovereign immunity is that the local government entity has some level of immunity from a claim, usually in tort – so personal injury, property damage, so civil, not criminal,” Epstein replied. “If somebody gets hurt or property gets damaged, there is a higher burden to go after that local government entity to get some recovery from them. Usually you have to prove there was some intentional conduct on behalf of the governmental body. Relative to sovereign immunity and additional insured, you need a permit to [work on that body’s property.] The permit has to come from the local government body. Anyone coming on their site has to list that body as an additional insured.
“A number of people have Native American casino interests here. You are well aware that someone doing work on a tribal site must specifically get registered. Vendors may not want to subject themselves to tribal courts. I would make sure to say to the venue ‘These national vendors are not comfortable being subjected to tribal court. Why don’t we just pick the local municipality.’ The tribal body is usually fine with that. They also don’t want to burden their courts. Just make sure it’s in the contract.”
Reinhold: “My experience with sovereign immunity is mostly on the artist side. When I represent artists performing at Indian casinos or state schools, I always try to have the end buyer limit their sovereign immunity. But often times they are not going to because their core business is not entertainment. They’re either a casino or a school. Your performance is really just ancillary. The agent can be clear with their client regarding the limitations – if there is a breach of contract, you can’t sue the buyer. So maybe get a deposit. Just be transparent with your client on what the rules are. The biggest problem is for the middle buyers. The state entity can’t protect the middle buyer. The middle buyer is contracting with the artist who wants indemnify for all of the normal things. So if you’re a middle agent, I would be careful weighing the two sides to that.”
“States can and will control what local governments are responsible for,” added Matthews. “Tennessee will say what you can sue Nashville for. It’s complicated.”
Epstein agreed, “You do not want to get the municipality involved. Avoid it at all costs.”
“You aren’t going to get indemnified by the state, but at least have a carve out,” Daughrity said. “If they say you need to indemnify them for all kinds of things, at least say ‘Except to the extent that it rises from their negligence or their willful misconduct.’ They may not protect you, but at least you can get rid of that part of the obligation to them.”
“I think that is smart with any contract,” Bernstein commented. “Everybody should take care of their own liabilities. If that happens, it will be a perfect world.”
“On indemnification language, I had a saying that was two or three sentences and it got expanded until it was 3 ½ pages,” Daughrity said. “Some stadium operator wanted to address one really weird specific issue. If he says that then I have to have a carve out. So, I went back to him with my original couple sentences, which basically said that each party is going to indemnify the other and its affiliates and subsidiaries, except to the extent that it arises from the actions of the party that is seeking the benefit of this provision.”
Reinhold: “Yeah, but if each party is responsible to indemnify the other for everything except for their own faults, then potentially they’re both indemnifying for the same thing. What I usually say is ‘I’ll identify you to the extent that directly results from my negligence.’ And depending on what side of the equation you are on, you may accept that or you may not. But it’s a good starting place.”
“I’m on both sides, because AEG operate venues and we operate tours, so I get into these arguments all the time,” said Bernstein. “Sometimes we don’t give mutual indemnity, because we don’t have to and we can get away with it. But I’ll still give the carve outs. If a band is playing on stage and they throw a guitar into the audience and that causes a problem, that’s not the venue operator’s fault. The promoter and the band should deal with that. If there is a slip & fall on the 400 level of your stadium, it has nothing to do with the band, other than they caused people to show up and pay money. That shouldn’t be on the promoter or the artist. So just be reasonable.”
Professional Liability, Cyber, D&O, EPLI, and other types of coverage beyond CGL & Workers’ Comp
Matthews moved the conversation to different types of insurance and began with errors and omissions insurance (E&O), which is a type of professional liability insurance that protects against claims made by clients for inadequate work or negligent actions – professional mistakes including software bugs, failure to deliver, and professional negligence.
Bernstein said, “I actually just wrote a new E&O policy with Beazley, out of London. It deals with songwriter infringement. E&O is a financial coverage. All of us sitting up here today have errors and omissions insurance, if we overlook something or if we leave something out.”
“Just remember that it is professional coverage for anybody who operates as a professional giving advice,’” Daughrity added. “There is a reason that E&O insurance is more expensive than your commercial general liability package – E&O claims get into some real money.”
Epstein continued, “Take the t-shirt security that you’re going to have at an event – if [a patron] gets hurt, that is going to be CGL. If security staff gets hurt, it’s going to be workers’ comp. But if somebody is giving you an overall security plan, that is going to be E&O.”
Reinhold and Epstein both urged everyone to make sure, with all insurance, that defense costs are on top of limits. Many carriers are happy to extend defense cost outside of limits. Reinhold said, “If you have a million-dollar policy, you want to make sure that attorney fees are above that because that is the most expensive part.
Cyber insurance, aka cyber liability insurance coverage (CLIC), is designed to mitigate risk exposure after a cyber-related security breach. Epstein is general counsel for Riot Fest. Ticketfly experienced a cyber attack during the Riot Fest on-sale earlier this year. Addressing this incident, Epstein said, “There are different policies that can cover hacks. When Ticketfly got hacked, tens of millions of people’s information got out. A cyber security policy would be the coverage Ticketfly or Eventbrite would have for third party suits from someone [whose information was exposed]. If a promoter sued a ticketing company for something like that, coverage would be arguably under their E&O policy. Because Ticketfly marketed for them, handled emails for them, set up their webpage, and was kind of everything-in-one, that [attack] materially affected the promoter’s ability to sell tickets and market their shows.”
“Cyber is an incredible coverage that everybody should have in this day and time, with emails and social engineering,” Bernstein added. “When private information from 10, 20, 30 million people gets out, people must be put on notice and some type of credit monitoring must be put in place. It typically costs about $150 per person. $150 x 30 million people – that’s a big number. Without cyber coverage, you would be out of pocket that amount of money. And who knows if you have a limit that big.”
Epstein agreed, “And that coverage is not just for a claim made by a third party – it could potentially step in and give you some money to help with your security moving forward or help you with a forensic analysis of your system to see what happened.”
Directors & officers insurance is designed for claims that may arise when directors & officers are acting in the scope of their managerial duties. Employment practices liability insurance covers harassment, discrimination, retaliation, and wrongful termination. “You can get these professional packages and it is a great way to have multiple coverages,” said Daughrity. “Employment practices liability is if an employee makes an allegation against anyone within the company. D&O is management liability. EPL just covers what happens in the walls of your business and any suit that would come from an employee. A suit coming out of a nonemployee would most likely be D&O. It is very important to know the difference between those two. If you are serving on boards or are a shareholder, D&O gives you liability for decisions that you might make on behalf of that board. There is a lot of protection within those. For people who don’t necessarily need a professional policy but sit on a lot of boards, there are a couple of really good endorsements coming from the personal insurance side that you might ask about. If you are on a board and they don’t have D&O, you might go to your personal provider and see if they can endorse D&O coverage fairly inexpensively.”
Epstein advised D&O coverage as a condition of serving on any board. “I have clients say to me ‘I only got selected for this board position because of what I do at my day job, so can I tap into that insurance coverage?’ The answer is a hard no.”
“A lot of EPL professional carriers are requiring sexual harassment training,” Bernstein said. “E&O, D&O, and EPL professional coverage are packaged together. If you have any of those coverages, and you would like workplace training, your EPL carrier would be happy to [provide] resources. I think people forget that you pay money for insurance, and there’s a shitload of resources out there for you. It is a risk management tool. If you don’t know where to go, call your insurance broker. If they don’t know, call me. I have so many resources that I am happy to send to anybody.”
Matthews and Daughrity both encourage regular insurance checkups, at least on an annual basis. Matthews suggested, “Bring a list from this panel and say ‘Talk to me about this. Am I covered?’”
“If you are in the business of entertainment, be with an entertainment broker,” Daughrity added. “There are great firms in New York, L.A., and Nashville. We are all friendly competitors. What drives me insane is when someone brings me a State Farm policy and it’s not covering anything that they think that it is and they’re paying $250 for it. Also, entertainment insurance doesn’t have to be expensive. I think that people think if they go to an entertainment broker, they are going to pay 10x the amount. That’s not the case. We are here to get you what you need and only that. I think that everyone up here would back that up. Go to an entertainment broker because there are niches within insurance and, if you are not in entertainment, you know nothing about it.”
Reinhold agreed, “Brent is 100% right. On top of that, don’t be afraid to ask questions to your insurance broker. If they don’t know the answer or it’s not sounding right, maybe they aren’t the right one for you. They should be able to have a conversation with you. You should be able to show them your contract and say ‘Does my insurance cover me for this type of liability that I am agreeing to?’ If they just say ‘Yes, yes, it’s fine,’ and you don’t feel comfortable with that, they might not actually know the answer. Don’t be intimidated. Send them your contracts and have conversations with them. You can learn from that too.”
“And get entertainment attorneys,” Epstein added. “If you represent talent, get a talent lawyer. If you’re a buyer, get a buyer lawyer. There are specialties. Lawyers who don’t practice entertainment should stay out of it. The problem is that you might be their only client in entertainment. When they go out with their other lawyer buddies, they get to talk about that sexy client that has a venue and gets them free tickets. They don’t want to give that up. But you might not get the best service. That’s not to criticize them as lawyers. They just don’t know. Unless you see deals over and over again, you have no idea what is out there.”
Harassment and Discrimination in the Workplace
Matthews shifted the discussion to harassment and discrimination in the workplace. On the legislative side, there are a number of federal statutes that address discrimination: Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964, Americans with Disabilities Act, and Age Discrimination in Employment Act. The U.S. Equal Employment Opportunity Commission (EEOC) is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person’s race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability, or genetic information. It is also illegal to discriminate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. Most employers with at least 15 employees are covered by EEOC laws. Most labor unions and employment agencies are also covered. The laws apply to all types of work situations including hiring, firing, promotions, harassment, training, wages, and benefits.
The EEOC has the authority to investigate charges of discrimination against employers who are covered by the laws, and advocates and provides resources for those who believe they have been victimized by an employer. “You can recover money from your employer, if it is determined that they behaved illegally,” Matthews said. “States also have general commissions that handle these claims. For example, Tennessee has the Human Rights Commission.”
Matthews read the EEOC’s definition of sexual harassment: “It is unlawful to harass a person, an applicant, or an employee because of that person’s sex. Harassment can include ‘sexual harassment’ or unwelcomed sexual advances, request for sexual favors, or other verbal or physical harassment of a sexual nature.
“Harassment doesn’t have to be of a sexual nature, however, and can include offensive remarks about a person’s sex. For example, it is illegal to harass a woman by making offensive comments about women in general.
“Both victim and harasser can be either male or female and the victim and the harasser can be the same sex. Although the law doesn’t prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal when it is so frequent and so severe that is causes a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim being fired or demoted). The harasser can be the victim’s supervisor, a supervisor in another area, a co-worker, or someone who is not an employee of the employer such as a client or customer.”
Persons who are victims of sexual harassment can sue under Title VII of the Civil Rights Act of 1964. In general, claims must be filed within 180 calendar days from the day that the discrimination took place. The Department of Labor publishes numerous facts sheets available at dol.gov.
Criminal harassment is a pattern of behavior or course of conduct that includes stalking and threatening conduct. Harassment is unwanted, unwelcomed, and uninvited behavior that demeans, threatens or offends the victim and results in a hostile environment for the victim.
Delaware and New York passed new laws this year providing sexual harassment protections in the workplace. Many states have more stringent rules than the federal statutes. For example, aggravated harassment in the first degree can be a class E felony in some states. “At the same time,” Matthews said, “Many states have more laws to protect employers than employees. It’s important to note that the burden of proof is always on the employee.”
“We all know that you aren’t supposed to grab people and touch them in certain ways,” Daughrity said. “We know that you aren’t supposed to trade sexual favors for promotions. Those are the blatant things. In terms of culture, you used to go to the auto mechanic and they’d have these calendars with sexy hot models with the tools. Or people would have calendars on their desk that are just offensive. Or you would hear people at lunch break using words that aren’t appropriate in a business situation. People should have their freedom but maybe you should keep it at home. It doesn’t all need to be in the office.”
“Sexual harassment and nondiscrimination training is no longer just for supervisors,” said Bernstein. “It is for everyone. Believe it or not, sometimes people witness something happening and don’t say anything. It is the same with a security issue – you should speak up and alert someone. There are discreet ways that you can alert someone to the fact that you witnessed something that is potentially harassment and you want to call it out before it grows into a definitive problem.”
“I worked at a very large company and the HR person’s office was right next to the office of one of the heads of the company,” Reinhold added. “That doesn’t really encourage people to come forward to talk to HR – the head of the company can see them walking in and out.”
“Obviously, sexual harassment training is important,” Reinhold continued. “But I think the most important thing is to have a company culture that supports people being able to talk about these things. These sexual harassment seminars, at least in my experience, are so boring. You sit there for 3 hours and everybody’s eyes are rolling. When it actually comes to a situation where somebody knows about something, they are only going to talk about it or report it if they feel comfortable doing that. I think that the culture at the company is as important as the training itself.”