Insurer not responsible for ticket refunds after COVID-19 cancellation
The popular SXSW music festival in Austin was canceled in 2020, and ticket holders were unhappy with their choices of compensation.
The U.S. District Court for the Western District of Texas, Austin, has deemed an insurer not responsible for 2020 event cancellation and ticket refunds.
In 2020, the South by Southwest (SXSW) annual music festival was canceled due to the COVID-19 pandemic. Festival officials canceled that year’s planned event and allowed ticket holders the option to defer 2020 tickets to any festival season between 2021-2023. Some ticket holders argued they should have been offered a cash refund option instead, but in the U.S., ticket buyer rights are governed by state statute, so decision makers at SXSW were under the impression that they were within their rights in offering a replacement ticket. In response, ticket holders filed a class-action lawsuit against SXSW, alleging breach of contract, unjust enrichment, and conversion.
In the underlying suit, ticket holders and SXSW reached a preliminary settlement, finding that any ticket holder who deferred their tickets was eligible for a $30 cash payment, while individuals who had not deferred could claim 40% of the original ticket price. After reaching a settlement with the ticket holders, SXSW looked to its insurer Federal Insurance Co., to recover damages. Federal denied the claim, pointing to a professional services exclusion in its policy which stipulated that in such circumstances, the insurer was not obliged to cover any legal fees. SXSW filed suit against the insurer.
SXSW argued that Federal misinterpreted the exclusion in the policy and was contractually obligated to cover the costs the festival incurred in the underlying suit. In court, the judge reviewed the allegations claimed in the underlying suit and the policy language, and found that Federal had appropriately interpreted the exclusion and that SXSW’s insurance claim was not covered under the policy. ‘
Insurance Coverage Law Center editor’s note: We’re starting to see COVID-19 business interruption cases hit state high courts. Many of those cases have been found in favor of the insurer, but there have been some cases, especially in lower courts, found in favor of policyholders that were decided on very specific sets of facts. Pandemic-related litigation began as soon as COVID-19 shutdown orders started to filter down in March 2020. It could be years until we see the full effect of COVID-19 business interruption claims. The prudent policyholder and insurer would maintain good records of policies, procedures, and other important potential claim information.
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