Contest insurance, part two: Protecting your payout




Part 1 of this series discussed how important it is to have contest insurance if the promotion has an expensive prize. It also warned that there are scammers who will sell you insurance but refuse to pay if someone wins the contest.

Part 2 of this series will focus on two things that you can do to make sure that your insurance coverage will be there if you need it.

First, while the overwhelming majority of contest insurance sellers are reputable and honest, you still need to be cautious in selecting your provider. Searching online for indications of the provider’s capabilities, history, and reputation can be informative. Checking with the Better Business Bureau and persons who you know who have used the provider’s services may also be helpful. But don’t hesitate to ask the provider for a list of references and recent customers. If the provider is reluctant to let you talk to any of its customers, it could be a red flag. Similarly, the old adage that, “if the price or offer is too good to be true, it probably is” may be a sign that you should look elsewhere.

The second thing that you should be aware of is the importance of contractual requirements that sponsors typically need to satisfy in order to receive coverage. Providers of contest insurance routinely condition their liability for paying for the prize(s) on the sponsor’s compliance with an assortment of requirements, usually called “certificates of participation.”

For example, I have seen certificates of participation or other such agreements that require the sponsor to:

1. Submit the contest’s official rules to the provider for approval;

2. Make sure the official rules comply with all federal, state and local laws and regulations;

3. Not tamper with or deviate from the official rules when implementing the contest;

4. Strictly adhere to the required procedures for determining the winner;

5. Provide third-party witnesses who can verify that the winner in fact won the prize;

6. Meet all deadlines for submitting claims;

7. Prepare proof of claim documentation;

8. Agree to allow a full investigation regarding how the winner won the prize; and

9. Pay all fees to the provider prior to start of the promotion.

Failing to comply with any one of these conditions could void the agreement and cancel the insurors’ responsibility for covering of the cost of the prize(s). It should come as no surprise that the insurer will try to find any possible way to avoid paying for the prize, so be warned. Your company’s failure to strictly comply with all the requirements could jeopardize the coverage upon which you are relying.

You should also consider adding a provision to the official rules alerting the winner that the insurer has the right to conduct a comprehensive investigation of how the promotion was implemented and how the winner won the prize, and note specifically that the investigation may include subjecting the winner to background checks and a polygraph examination.

Dale Joerling is the chair of Thompson Coburn’s Advertising, Marketing and Promotion Law group. He is editorial director of the Sweepstakes Law Blog. You can reach Dale at (314) 552-6058 or

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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