Jackson's $25M Concert Insurance Could Take Months to Sort Out

ABC News has learned that concert promoter AEG purchased a $25 million insurance policy to cover its now-cancelled series of Michael Jackson concerts but that it will take months to determine whether the company will actually receive a payout.

The policy was brokered by Robertson Taylor, a top U.K. broker for nonappearance insurance -- which provides coverage in case of a performer's absence -- and was underwritten by a syndicate led by Lloyd's of London and including both U.S. and U.K. nonappearance underwriters, a highly-placed source within the insurance industry told ABC News. Robertson Taylor would not confirm the size and details of the policy.

Whether AEG receives payment from its insurers depends on the reading of the insurance policy: AEG may argue that Jackson's death was covered as long as it's not deemed a suicide or that the star died after self-administering prescribed medications. The insurance companies, meanwhile, could argue that death from self-administering prescribed medications is not covered.

It could take months for AEG and the companies to come to an agreement.

As the insurance wrangling continues, new attention has been turned to a critical part of the underwriting process for nonappearance insurance: The physical examination, also known as a "cast" exam.

AEG CEO Randy Phillips told ABC News that Jackson's physical lasted five hours and included a "battery of tests."

Industry sources tell ABC News say that the policy of administering of such exams is flawed. While cast examinations are supposed to be performed by independent physicians, the doctors are often star struck and gloss over the exams to help the star feel more comfortable.

Insurance brokers often ask that insurers use physicians already familiar with the patient -- that is, one of the star's own doctors -- and insurers, who cite competitive pressures as a reason, often concur.

It's unclear what relationship, if any, Jackson had with the physician who performed his exam.

AEG's troubles following Jackson's death have shone a spotlight behind the stage and onto some of the most risk-prone players in the music industry: concert promoters.

Jackson, Other Stars Lead to Promoter Headaches

Even before Jackson's death, music, insurance and legal circles were buzzing about the risk that concert promoter AEG Live was taking on by staging Jackson's 50-concert London series.

"He's been sued so many times, was known not to show up, had health problems, and was believed to have drug problem," a Jackson associate told ABCNews.com. "Nobody would touch him."

Jackson's dubious reputation stemmed from no fewer than three lawsuits filed against him by concert promoters angry about concert cancellations, as well as worries that the pop star was addicted to Demerol, OxyContin and other drugs.

AEG's Jackson woes aside, experts and industry watchers say that, generally, what makes concert promotion such as risky business is concerns about ticket sales. Because the profit margins for promoters are so slim -- generally in the range of five percent or less -- they rely on close-to-capacity crowds to stay in the black.

"It can be very expensive," said Gary Bongiovanni, the editor of the concert magazine Pollstar. "Lots of promoters are gamblers by nature."

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