Terms & Conditions Power Panel Part 2: Contracts … and yet another discussion of COIs

Panelists:

Jason Bernstein, AEG Presents
Brent Daughrity, Anderson Benson Insurance
Tim Epstein, Duggan Bertsch, LLC

Moderated by:

Pam Matthews, IEBA

The 2022 installment of Terms & Conditions Power Panel focused on questions submitted in advance by IEBA Members.

Question: What does the law saw about performing a show without a fully executed contract and rider?

Bernstein began the discussion, “On show day, Susan Rosenbluth used to tell tour managers, ‘If you don't sign this contract, I'm not writing the check.’ That was back in the day. It doesn't really work anymore, and we get more contracts back now. But the law says: a meeting of the minds. There's an offer. There's acceptance. Maybe the agency has an issue and there’s a counteroffer. If it's not in the final paperwork, it may not count. But basically, we announced the show, we put it on sale, your artist showed up, and your artist performed. That's literally acceptance by performance. If there's a bona fide dispute, the lawyers will figure it out.”

“There’s an insurance interplay that is important to understand,” Epstein cautioned. “It goes to additional insured coverage, which is important for all of us here. The state of insurance law is – if it doesn't say it in the contract, it doesn't count. Most of you have a provision within your insurance policy – a blanket additional insured endorsement – that says whenever it's bound under a contract it’s covered. So, it is arguable under current insurance law that, if you don't have a signed agreement, the additional insured status may get rejected. So, you should insert ‘per written contract’ language. Don't say ‘per signed contract.’ Still, you don't want to get into a declaratory government action with an insurance carrier. And remember that carriers fight when the market is down.”

“Yeah, and they have all the money,” said Daughrity.

“So the short answer is – there are two answers,” Matthews summarized. “I made the offer and the acceptance is that the artist showed up to perform. The second issue is about insurance. If the contract is not signed, I may not have coverage.”

“There is the argument,” replied Daughrity.

“You don't want to give a carrier any reason to deny a claim,” Epstein continued. “And it's more likely they'll deny when the market is down. When the market is down, litigation goes up and claims go up. Carriers are going to deny or not pay fully when the performance agreement isn’t signed. I've never seen a judge say, ‘Well, there wasn't a signed contract so we're not going to move forward.’ Unless there's some crazy provision like liquidated damages. If you want to put something in a contract that’s really going to hammer someone, you’ve got to get it signed. Because you're gonna have tough time enforcing that provision. But just a standard performance agreement, it's probably going to be enforceable if the performance takes place. The question is what happens when the performance doesn't take place? Now what are we going do? The courts going to look at your history. What have you done with this agency before? What have you done with this promoter before? What have you done with this artist before? Did you finalize the salient facts and viewpoints? Or were we still going back and forth?”

The discussion turned to certificates of insurance, as it often does during this annual panel. Daughrity introduced the subject: “COIs float around all the time and – just like Tim says – they’re nothing but paper. A COI cannot legally bind to a carrier because it's something the broker fills out. Having that actual physical endorsement is best practice. And set up a system of compliance where every vendor that comes on your grounds or property sends a proper COI. If they don't have proper coverage, go back to the manager or lawyer or whoever and say, ‘Look we've got this show and the amphitheater has $500,000 in liability. Do you want your artist to enter into that facility?’ We look at insurance, indemnity, and force majeure language in every contract and every deal for every major tour we do. We just completed #23. We expect all vendors to have a minimum of $10M in liability, $25M in life. It's important to pay attention. I think so many people just throw COIs in a file and they don't look at them and ask questions. Like, if you see $1,000,000 in liability on anything right now, I mean I would … just NO. I think insurance is getting is expensive and people are trying to get by and they don't care. They'll declare bankruptcy and move on. But you really have to look at these – have an expert on your legal look at them – and make sure everybody's comfortable. Also, at the top right of the COI is the carrier’s name. If you see State Farm or something random, run! They don't write that business so, in the event of a claim, you're going to be hosed.”

Question: I can negotiate a boilerplate contact?

“There's been a focus on force measure and cancellation, especially the last few years with COVID,” said Epstein. “You should have consistent consensus terms you’ve worked out ahead of time with an agency. Be robust in your offers. I don't care about the number of pages. I've already articulated that. Be detailed! If you have a force measure provision you want to govern the relationship between the promoter and the artist, put it in your offer. If you have cancellation language that you want to govern the contract, put it in the offer. And make the agency say are they are confirming under the terms of your offer. Have that debate up front before you get a contract and before you send in the deposit. If they pound sand, you can make the choice to book that artist or not. When you're too far down the road, negotiating force majeure and cancellation language gets really tough.”

“We’re at the point where some contract administrators are just striking the entire rider –which isn't good bedside manner,” Bernstein stated. “It's mostly because so many of them have legalese. But I'm not gonna get into legal trouble because I got the wrong bottle of wine. Regardless a given artist’s position, there's a way we do business regarding insurance, indemnification, force majeure, security. We're a respectable company. We're going to do the right thing. We actually want everyone to have a good time and come back. We're going to fill as much of your rider as we can, within reason. Artist riders should have hospitality information and production information. The artist writer should not include insurance. And I'm not going to fight over duplicative force majeure.”

Circling back to boilerplate contract language, Bernstein advised, “Get on the phone and talk with all the business affairs people at the agencies. Steve from WME is in the audience. I’ve worked with Angie and Kevin at UTA. Greg Hoffman. This goes from stadium level artists to clubs, theaters, and ballrooms. There are no secrets. Once I've sent out our terms & conditions, they’re going to business managers and they’re going to tour managers. They’re out there. All my force majeure clauses are essentially identical because we would get creamed if I gave William Morris one set of terms and CAA and UTA a different one. With the smaller agencies and with NITO, I'll give you the same exact terms. But you can’t pick and choose a sentence from this provision and a sentence from that one. No, this is the end result of a negotiation. You know, the biggest thing I’ve learned through this whole process – as much as they care about protecting the artists, I think the genuine fear is not that someone's getting a different deal but that someone’s getting a better one.”