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Judge sides with insurer in SXSW insurance dispute

By | Published on Wednesday 25 May 2022


A magistrate judge in the US courts has recommended that insurer Federal Insurance Co be granted a summary judgement in its favour in an ongoing legal battle with the South By South West music festival.

That legal battle relates to a dispute regarding whether or not the insurer should cover costs the SXSW company incurred when it was sued by a group of ticket-buyers following the COVID-caused cancellation of its 2020 edition.

The SXSW music conference and showcase festival was one of the first major music events to cancel as the COVID pandemic first started to spike in the US.

Those who had bought tickets to the cancelled event were told that they could defer those tickets for use at the 2021, 2022 or 2023 editions of SXSW. However, some ticket-holders reckoned that they should have been given the option of a cash refund.

The exact rules regarding the rights of ticket-buyers when shows are cancelled differ around the world and, in the US, from state to state. But nevertheless, some of the aggrieved SXSW ticket-holders filed a class action lawsuit accusing the festival of breach of contract, unjust enrichment and conversion, the latter meaning they unlawfully interfered with the personal property of another.

That lawsuit was ultimately settled, but resulted in this additional litigation as SXSW sought to recover the costs it incurred in reaching said settlement from its insurer. Federal Insurance Co refused to compensate the festival on the basis its insurance policy included a professional services exclusion that applied in this case, meaning it wasn’t obliged to cover any legal fees.

According to Law360, after considering arguments presented by both sides, judge Susan Hightower concluded that that exclusion did indeed apply, because this was ultimately a contractural dispute between SXSW and its ticket-buyers, and legal costs stemming from contract disputes are among the things excluded from the coverage provided by the insurer.

She also didn’t accept SXSW’s argument that the insurer was applying an “overboard interpretation” of the exclusion, nor that the unjust enrichment and conversion claims in the class action should be treated separately and therefore not be subject to the contract dispute exclusion. Those other claims were a consequence of the disputed contract between SXSW and its ticket-buyers, she said.

It’s now up to district judge Robert Pitman to decide whether to follow Hightower’s recommendation and issue the summary judgement in the insurance firm’s favour.