Do you have an Insurable Interest?

When it comes to hosting events such as weddings, we often get asked who should buy what insurance?

For both cancellation and liability insurance you need to have what is known as an  "insurable interest". An Insurable interest is defined as “an economic stake in an event for which a person or entity purchases an insurance policy to mitigate the risk of loss”. Ok what does that mean in English.

With respect to cancellation / loss of deposit insurance it’s super easy – if it’s your money then you should be the one buying the insurance. Your money is your economic stake (aka insurable interest).

Where this gets a little complicated is when we are talking about liability insurance.

Decoding Insurable Interest:

Insurable interest essentially means if there is any property damage to the venue are you financially responsible, or if someone is injured are you legally responsible? If the answer is yes to either of these questions, then you have an insurable interest and should purchase liability insurance.

Application to Events – Who Has an Insurable Interest:

Consider a wedding hosted at a venue.  How do you know if you are responsible for property damage to the venue or an injury occurring at the event. It’s easy if you are the one that causes the damage or injury, but what if the damage or injury is caused by one of your guests?

This generally starts and ends with the venue contract. All venue rental contracts make the renter (the person whose name is on the contract and who signs the contract) responsible for any property damage or injuries caused by their guests. To cover this responsibility, venues require liability insurance from the renter. This responsibility the renter took on is their “insurable interest”.

The venue renter can be the couple, their parents or anyone else who signs the venue contract for the couple’s wedding. This is the person(s) who should be the Insured person on the policy. They are the one who the venue or an injured person is going to look to if something goes wrong.

Identifying Parties with NO Insurable Interest:

1) The Couple: If the couple does not sign the contract with the venue, then they have not explicitly accepting responsibility for any damages or injuries during the event. Simply being the couple getting married or the host of the event does not make you responsible for other people’s actions.

2) The Parents: Although parents may contribute financially to the wedding, if they have not signed the venue’s contract then they are treated like any other guest at the wedding and guests are not responsible for what other guests do at the wedding. Simply cutting a check does not make a parent legally liable to the venue or guests for property damage or injuries they did not directly cause.

What about the venue, what is their insurable interest? The venue where the event takes place and its their property that can potential be damaged. Also, if there is an injury on their property, they will get sued. These elements create an insurable interest on behalf of the venue. That is why venues require renters to list them as an additional insured on the renter’s liability policy. 

In a Nutshell:

Insurable interest simplifies to “do you have a stake in in the outcome if something goes wrong”. Those directly engaged in signing venue contracts or owning the venue property both hold insurable interest. It's crucial for event planning, like weddings, as it clarifies responsibility and who should be the Insured on the liability insurance policy.

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