How the Aurora shooting affected movie theater underwriting

As James Holmes’s trial begins this week, IBA asks underwriters whether the event affected the risk profiles of entertainment venues.

Insurance News

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The long awaited trial of Colorado theater gunman James Holmes began this week, with jury members asked to decide whether Holmes should be executed, spend his life in prison or be declared criminally insane and confined to an institution.

Holmes opened fire in a crowded Aurora, Colorado theater in 2012, killing 12 people and injuring 70 others. His actions caused many to reevaluate the safety procedures of entertainment venues – though they did not cause a material shift in the risk profiles of movie theaters nor an appreciable change in the way insurance companies and underwriters approach entertainment risks.

According to Molly Schory, senior underwriter with sports and recreation MGU K&K Insurance, underwriters are certainly more cognizant of emergency plans and evacuation procedures in light of the events in Aurora.

However, the fundamental risk profile of theaters has not changed.

“The Aurora tragedy has not changed the overall process in which we underwrite theaters and other venues,” said K&K’s Lorena Hatfield, “simply because of K&K’s long history of understanding the risks involved with any large gathering of the public – whether from man-made or natural causes.”

The shooting itself likely triggered insurance policies such as commercial property and business interruption, as well as coverage for reputational damage and crisis management. The theater chain’s commercial general liability policy, however, bore the brunt of the coverage response.

Cinemark Holdings – which owned the Century 16 theater chain – was self-insured for general liability claims with a cap of $250,000 per occurrence and $2.7 million annually. It was also self-insured for medical claims up to $125,000 and fully insured for workers’ compensation claims.

The extreme nature of the losses, however, likely exceeded those limits. In the view of Massachusetts-based Amity Insurance, that’s a reason for insurance brokers working with entertainment venues to review their clients’ insurance policies and internal risk management procedures.

“If you own a public venue of any kind, take a good, hard look at your deductibles and insurance benefit caps for a situation such as this,” the company said. “Large amounts of liability coverage – sufficient to cover potential claims from an event like this many times over – can still be obtained at a very affordable premium.

“Because events like this are so rare, there are many, many theater companies paying in to the risk pool.”
 

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