 Welcome to the wide world of eSports, the show devoted to all things eSports. I'm your host, Catherine Norr. Today, we're talking with Ron Hess, VP of Commercial Entertainment at Momentus Insurance Brokerage. And we're talking about ensuring eSports events strategies for risk management. Welcome, Ron. Hi. I'm glad to be here. All right. So I'm sure everyone wonders why is insurance important in business related to eSports events? Well, primarily, primarily, there's so many moving parts. And we look at eSports events from both sides, whether you're the promoter or you're the gaming company that is going to set up the event, or even a production company that's going to be working as the vendor that manages all the production aspects of the event. And that can be the entertainment quality, the sets, the stage, the visual effects, the performers. Events are now much larger than they used to be. They used to be guys getting into a room, into, say, a hotel lobby or a parlor and playing static at a laptop. Now, there's so much more involved, a lot of moving parts and logistics. And it is an actual entertainment venue now that is just so much more than it used to be. Now, I know, Ron, that you are not the normal type of person to be involved in insurance. You have a really interesting background in entertainment, film, television. Tell us about your background and how you ended up in the insurance business in relation to eSports and other entertainment. Sure. So back in the early 90s, I was an actor, and I was in SAG and AFTER, and I got on a lot of film sets. And I got a lot of different television productions. I did a lot of commercials for Disney and various purposes for film and television. And there was a couple of times where I was working on a set with very notable directors, and everything just stopped. Like, nothing would happen. Everyone was standing around waiting. Well, they were waiting on a certificate of insurance to get done what they needed to get done that day because the underwriters had not approved some type of effect or some type of activity, and they had to get it approved. And so they were waiting to get that done, whether it was getting equipment because the equipment needed to be assured or a stunt or use of pyrotechnics. And I took note of that and said, well, this is pretty interesting that insurance has such a control over the facilitation and operation of a production like this. And that's how I got my start. And took off from there. I've been doing insurance ever since 1996, and that's all forms of entertainment, whether it's music and touring for bands and singers and performers, live events like the Roseville Parade or the Hollywood Christmas Parade, different things to do with television shows and films, of course, and then any of their live events. I ensured all the effects and presentation at the last presidential inauguration. World Fair and Dubai worked on that and Ferris wheel in Times Square two years ago, which was the first time they had had a Ferris wheel in Times Square in 75 years. So unique risks that take a lot of creativity and thinking about what we're going to do and how we can manage that risk to prevent problems, but also back you up in case there is a problem. You know, so having fairly recently gone to Lloyds of London in London and touring it, you know, I was kind of wondering, are you going to insurers like Lloyds of London or are there US insurers who are taking on these risks? For a lot of the property casualties type stuff, which is liability, workers come, auto exposures, anything to do with your higher limits or possibly employment practices liability, we'll go to US domestic market. But a lot of times when you think about terms of non appearance or event cancellation coverage, kidnap and ransom coverage, media liability, Arizona missions, active assailant, the active shooter type policies, any of those type of specialty type policies, which they call contingent insurance, contingent specialty policies, we'll go to Lloyds, we'll go to London markets for that. Because you literally have to manuscript a policy with so many different nuances that are not going to be preformed in a basic policy that you'll buy such as general liability or workers comp. How does the process of an insuring an eSports event compare to other events? Well, we do look at it very similar. But of course, we're starting from both sides as I said before, we can either ensure from the promoters responsibility and event liability where they're responsible for the participants and the spectators at the show, they might be responsible for the venue. Or we can look at the vendor that's going to be do the production aspects. That is things like stage elements, building a stage, building a set, pulling off the special effects of pyrotechnics or flames and cryogenics, which they use cryo for smoke and haze. You'll see at shows recently, there have been live performers and singers that will have pyro on stage. And those are all risks that we have to take into account. So we'll approach it like other events where we get the complete gross production costs of the event, the budget, number of people in attendance. These are all things we take into consideration capacity of the number of people. How many players? Will there be a live audience? And who is doing what? And we look at all the different vendors and all the people and companies involved, and we make sure they have insurance too. So we do a rundown of not only your cost, how long it's going to take, when it's going to come off, when it's going to be presented, and what safety protocols are in place to keep things from happening. You might have a fire marshal out there that checks the and approves the pyro. They'll talk with our underwriters at the insurance company of the loss control team to make sure everything's being done appropriately. And that's what we work with as our fabric and toolbox to place insurance for these type of events. So if I'm running, I'm an event director and I am preparing to have my event and I talk to you about insurance. What are the basic insurance needs that I would have as a promoter of a general eSports event that maybe doesn't have pyrotechnics or other more unusual elements? Sure. Like any business, you're going to have general liability coverage. You're going to have non-owned auto coverage in case you have mobile trucks or communication to satellites or equipment. You'll have workers compensation. You'll have equipment coverage for the network equipment, maybe lighting. You'll have some type of presentation elements, even if you don't have all those other special effects. Workers comp, if you're going to hire a team or maybe you'll use a payroll service that provides you workers comp. And then umbrella for higher liability limits, that's going to be your basic type of coverage that any business would have, whether you're an event like this or you're a shoe store. However, there's things about events where there could be exclusions on a general liability policy that you have to consider or an event like this where you have participants and spectators, such as in an event like this, general liability policy will exclude participant injury because you have participants. Now with eSports in recent years, because it's become so popular, you've heard of things like a deep vein thrombosis. Someone gets up there for playing all day and they pass out. Gamers thumb, repetitive strain injury, postural syndromes, nerve impingement, these things can happen. And participants' injury could be excluded. So we want to write something back in to cover that, which is called accidental deathness, memberment type coverage and medical to cover participants, if in fact the general liability carrier does not want to cover participants. It is a sport and you can get injured. And so because of that, they may say, well, we don't want that. So we go to another carrier like a London market and say, what can you get from me on accidental death and dismemberment or medical coverage? And we'll write a policy specifically for that based on the number of participants. So what if I'm a team owner and I want to ensure a game house where participants, actually team members, live, practice and stream, what kind of insurance would you provide and what kind of considerations would you have for that kind of risk? Well, I would look at first, I think the best way to cover them would be, are you hiring them as employees? And I've done something like this in this very nature, but with a boxing company that hired the boxers as employees provided them training facilities, but as you can guess, I mean, boxers are going to get injured. You're ensuring them for workers comp, it's a known risk. So the rates were really high, but that would be the best way to approach it in this case. I would want them on workers comp. Otherwise, you're then falling back on this liability and accidental death and dismemberment type coverage, which has a cap limit. Workers comp has no cap limit. It's unless, you know, if someone's injured, whatever it takes to get maximum recovery out of their injuries. So that's probably how I'd approach it there. But of course, you then have all those other coverages, general liability, non-owned auto and all these things for them. But if they're playing on site, I would definitely want to see if I could hire them as employees to get the advantage of workers comp. So you mentioned active shooter coverage. Are you having to include that in all events or how does, how does, is that considered? It would be, first of all, there may be a contract that requires something like that. We haven't seen that too often. So more in line with being a benefit to the insured, if they think there could be a potential risk. And what's interesting about active shooter coverage or active assailant nowadays, is it doesn't necessarily need to be someone with a gun. It could be someone with a truck. We look at that. It is more of a crisis response reimbursement policy. There's no real liability in that. So if something happens, you're really getting that policy to help the medical costs and, you know, mental consultation and the things that come and the aftermath in order to avoid being sued because someone may say, well, you should have known, but that's really just as a crisis response type policy, a reimbursement policy for the lost property damage from the shooter. And, and not so much a liability type policy. So when people think about eSports, they, you know, clearly much of the action is on, you know, we use computers and we're using, you know, people are streaming and playing on devices, consoles. I wonder about cyber liability coverage. Do you, is that a big part of eSports coverage? Not from the production side, but from the promoter event holder. It may be, because when you look at eSports, you're not only gathering and retaining a lot of private information, names, emails in the process of just building up to the event, names, emails, addresses, maybe credit cards. And you have a responsibility with that information to protect it. There's regulatory laws that require you to protect it. And cyber liability can include that, not only for protecting that information of third parties, but also protecting against ransom and hacking. You know, someone who tries to shut you down, someone gets in and who skates your systems that doesn't allow you to hold the event. That is something, though, that we can then look at to event cancellation coverage or satellite or transmission broadcast failure. There's a type of policy we go to London again to get where then you're broadcasting the event live. And if it fails, then you have a loss of business income. You have a loss of ability to hold the event. So we can look at broadcast transmission failure, but the cyber liability would definitely be important from the promoter side. And I saw a contract recently where the production team is taking on the aspects of equipment and retaining that information to run it through servers. So they are actually buying the cyber liability. We don't typically see the requirement of the production side having to do that. But in this recent contract I have, that was a requirement. So are there any obscure esoteric risks in esports that a casual observer would miss? I think you fall back on the active assailant, active shooters kind of esoteric to some other events might not have that more and more events are seen. I mean, you look at what happened in Las Vegas in 2017 or in Nice with the truck driver or even Eagles a death metal event in 2016. And it is becoming more a common thing that we have to protect against. But there are other forms of terrorism coverage, actual terrorism, someone that would have a terrorist act and we would look at that in conjunction with event cancellation coverage. Here of terrorism, a terrorist threat, actual terrorist act, that can be part of something that cancels your event and that would be something we can build into the event cancellation coverage. We could look at some things like protecting name sponsorship rights. So let's say you're a company, a third party that's organizing something for a well-known game company and you're setting up the event and you have naming rights to the event, maybe a third party. You would want to protect the business and come around that from cancellation in the event. So you might write a separate policy in accordance with that event cancellation to protect the guarantees or the revenue being made from the naming rights. Naming rights are things like a company buys the right to name a baseball park or name a movie theater, gateway park board, say Xerox Theater or something like that. You're going to see that type of thing that we'd want to protect that naming right consideration. And then if this is going to be broadcast and it is over a distribution network that requires errors in emissions coverage, media liability, errors in emissions for content and that is to protect against things like copyright infringement, trademark infringement, defamation of character, dilution of a product, whatever that might be. That's something we look at too and that ensures you for errors in emissions in your content and the lawsuits that might come out of that. Right. You know in recent and I think the last year or so we've seen a few public situations where there were crush injuries or people were killed when there were stampede. What kind of average would be in place in that situation? And typically that's going to fall under the general liability coverage or you're going to want to increase your limits with an umbrella or an excess policy to go over those liability limits and you're going to want to then make sure that you have all the security in place. A lot of what happens in those proud crush situations can be managed by on the ground risk management, making sure you have security in place, making sure you have proper dividers, making sure that you have egress and exits that are not blocked or controlled where people are pooled into an area and they can't get out and that's the kind of risk management that we look at as capacity for the size but that's going to fall on liability and whose liability is that? Maybe it's on the security company, maybe it's on the promoter, maybe it is on the production company but your production company typically is not responsible for audience liability. That's going to fall on the promoter or the game company that's holding the event, the venue or the security company. So as an insurance defense attorney that's where I would come in if there was a lawsuit and it was filed against the promoter or the organization and they would allege that there was lack of security or other liability in relation to those kind of things. And they name everybody in a lawsuit. They're even going to name the performer for trying to incite the crowd and that really happened, approaching the stage. You can see that where the performer says, hey everybody, let's do a mosh pit and people get hurt, that's on him. We'll try to put it on him. We protect ourselves with that up front though by deferring that risk to someone else and getting a waiver of segregation so they can't come and sue us and then there the whole responsibility falls on whoever the venue was because the venue truly is responsible for the audience's safety and they have a duty of care to making sure the audience is safe. Our performer, Nathanael. Do insurers require that the event has attendees or certain people sign liability waivers in order as part of the agreement or is that something that they can just choose on their own? We usually like to see that and where the venues are insured. You often see if you go to Dodger Stadium, you look at the back of your ticket and it has that waiver on there, hold harmless. The downside of that is that's almost just to encourage someone from not suing. As you might know, it doesn't stop someone from suing and that's where insurance steps into place. Insurance is not necessarily about actually covering a loss but the defense costs to respond to that claim. A lot of those releases and waivers aren't worth the paper they're written on once you get to court. It really comes down to was there a duty of care and who had that duty of care to protect that person in that venue? You hear about people getting hit with baseballs or people falling down steps in a stadium. They usually prevail if they actually take it to court even though the ticket says well you hold harmless and waiver. There's still a responsibility there and if something's egregious or grossly negligent, that's definitely going to be a situation where they're going to prevail on court. I've actually handled cases where the plaintiff's attorney has chosen not to sue particular persons or companies that were specifically named on the liability waiver and they've filed a lawsuit against my client who wasn't specifically named. He was a participant. I know how that works. We don't want to take our chances, we'll just sue the other people. Whoever has the deepest pockets too. How is the insurance industry preparing for the emerging risks associated with the introduction of AI or artificial intelligence in gaming? Well, when you look at artificial intelligence in gaming and what that's going to do for eSports, I fully expect that's going to expand how games are played. It's going to make your foe much more autonomous. Imagine in playing a character that can make its own decisions and I'm not saying like you're in New York playing a guy in Japan. You're both playing a machine that can make its own decisions. You don't know how it's going to decide and through its experience and learning factor it can make new decisions that were never programmed or coded into the game by the programmers. How will that parlay into real world gaming? I think in the future we'll see something as wild as the film Ready Player One or in the Matrix where people actually physically interact with the game and not just at controllers and laptops but literally aptic peripherals, motion capture body suits that they're athletic and it's a true MMA fight against someone like you could recreate a Bruce Lee as an autonomous character in a video game and you're fighting him. You get to go toe to toe with Bruce Lee because the AI learns all his moves from all his movies and there you go enter the dragon and you've got him. You literally get a chance to fight Bruce Lee. I could see that in the future where video games become much more physically demanding and then we have to look at ensuring it no different than any other sports, real world sports like basketball and football and baseball. It's going to add a whole new element to video games and then therefore I think the metaverse that everyone's talking about is gone by the wayside. I think you're going to see that come back with a incredible surge of popularity once AI connects to it. Sure. I was just going to ask you about the metaverse so you beat me to it. What advice do you give to anyone putting on an eSports event in terms of what they should do if they have no insurance? Well, they have no insurance. That's going to be problematic only because most of the contracts, whether you hold your event or whether you're securing a vendor, they're going to require you to have some kind of insurance. But they could give me a call. That's one option. But definitely a lot of times insurance is thought of after the fact. They really should put that into their budget. Think in terms of anywhere from 10% to 13% of your overall cost and then talk with an insurance worker as soon as possible to work that in her budget. You don't want surprises later for the things that you want to do to say, oh my gosh, you can't do this. I can't afford that part. Find out what your contract says about your insurance requirement, present your budget, and then talk to an insurance worker as soon as you can. You want that out of the way first. You don't want surprises three days before your event. My gosh, we can't do this because we don't have the right insurance. As an insurance defense attorney, insurance companies hire me to represent essentially defendants, their insurers. They're in a situation where those defendants, my clients, are in a situation where they don't have to pay my fees because they had insurance and so the insurance covers my fee. It also will uncover them if there's a judgment or settlement up to the policy limits as long as there's no exclusion. They benefit from that. However, if someone doesn't have insurance, then they find themselves in a really difficult situation in terms of insurance, defense costs, as well as potential indemnity costs. What do you tell prospective clients or clients about those concerns in terms of the cost if they don't have coverage? Boy, out-of-pocket costs can rack up pretty quick. If they don't have insurance and they're not ready to respond to defense costs, self-insuring, of course, could be an option, but you have to be a pretty big corporation to self-insure. You better have a lot of liquid assets and liquid reserves to be able to come up with the cash to respond to claims like that and then hire some good negotiators. If you don't have insurance, hire some good negotiators to try and work with whoever is trying to sue you to minimize how much they're trying to collect and be honest and try. If they want $3 million, try to knock it down as or whatever you can pay, but without insurance, you're on your own. Right. If someone wants to contact you about working with you to get insurance coverage, how do they do that? Sure. They can send me an email. It's Ron.Hess at MMIBI.com, or they can even call our company Momentus Insurance. I think we'll have it on the website here, but they can call me directly at 818-574-0435. Terrific, Ron. Well, I'm sure that if people watch this and they act and actually get insurance for their event, and it's the correct coverage that if they have a claim that they'll help them quite a bit, but I appreciate so much. You're sharing all of this important information with us. My pleasure. All right. Thank you to our viewers for joining us today. Next week, my guest will be Ryan Hawkes to talk about GamerSync. See you then.