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Court Rules on Jujamcyn Theaters' Fight for Covid-Related Insurance Coverage

In August 2020 Jujamcyn sued Federal Insurance Company and Pacific Indemnity Company.

Jujamcyn Theaters' fight for Covid-related insurance coverage has suffered a mighty blow. A Court in the Southern District of New York, which is a federal court, decided against Jujamcyn in its lawsuit against Federal Insurance Company and trimmed Jujamcyn's case against another insurer, Pacific Indemnity Company.

In 2020, Jujamcyn found itself facing the same issue many theater owners and producers did: there was no theater. Many of these companies sought insurance coverage, which made sense, but some of the applications were met with denials or limited payouts.

In August 2020, Jujamcyn sued Federal and Pacific, both of which are owned by insurance powerhouse Chubb. While Jujamcyn did not sue for a specific total amount, they alleged that the insurance policies together should have provided tens of millions of dollars in coverage.

Jujamcyn's Federal insurance policy was an "all-risk" property insurance policy that provided coverage for losses that "result from direct physical loss or damage" and that are "the direct result of direct physical loss or damage to property." The policy didn't have an exception for communicable diseases and Jujamcyn argued that because Covid can adhere to surfaces or be suspended in the air that amounted to physical damage. Federal denied the claim. The Court sided with Federal. Citing precedent, the Court said basically that Jujamcyn hadn't adequately alleged "physical damage." The Court, therefore, held Jujamcyn did not have a legitimate case against Federal. Jujamcyn can appeal, but, as of now, it has lost. No discovery, no further argument. This is a major setback for the theater chain, because the implication in the complaint it filed was that it was expecting significantly more money from Federal than Pacific.

Jujamcyn's claims against Pacific were a little different than its claims against Federal. Pacific sold Jujamcyn "Performance Disruption" insurance and there was clearly a performance disruption. But there was still an issue. The policy was capped at $250,000 for each loss. Jujamcyn, which was the sole signatory on the contract, argued that this should apply per theater, which would amount to five payments of $250,000 each. Pacific only awarded $250,000 overall, leaving Jujamcyn to believe it was shorted $1 million. Pacific argued that it was right because Covid was one single pandemic, leading to a single loss. Here the Court said the term "each loss" was "ambiguous" and is allowing the case to proceed. In other words, the Court said it can't decide for one side or the other right now. Both sides will be able to get discovery on Jujamcyn's claim that Pacific breached the contract between the two of them--and there may eventually even be a trial (though that is highly unlikely). However, while the Court said the "breach of contract" claim against Pacific could proceed, the Court dismissed two other related claims Jujamcyn brought against Pacific.

This is only one Covid-related case pending that impacts the Broadway world. During the pandemic, many shows reportedly received large insurance payouts. This included COME FROM AWAY, COMPANY, DEAR EVAN HANSEN, GIRL FROM THE NORTH COUNTRY and HADESTOWN. But others weren't as lucky, thanks to different carriers or simply different policies.

Those that are following pandemic-related legal news might remember there was recently a decision in a case the producers of TINA: THE Tina Turner MUSICAL filed against Chubb. A few months ago an appellate court affirmed a lower court ruling allowing the case to proceed to discovery. The policy and arguments were very different in that case. Chubb argued that the case should be dismissed because its policy had an exclusion which barred losses from a communicable disease that causes restrictions on people's movement, or the issuance of travel advisory or warnings, imposed "by any national or international body or agency." TINA argued that its closings was the result of orders by New York state and New York City, not the federal government. The court bought that and refused to dismiss the complaint, so that case is ongoing as well.

The producers of HARRY POTTER AND THE CURSED CHILD have also sued in New York State Court over denied insurance coverage. The producers sued certain underwriters at Lloyd's, London complaining that the "communicable disease" exception in its contract does not apply. That case is not as far along as the others--a motion to dismiss is still pending.

Overseas, International Entertainment Holdings Limited, the parent company of theater owner Ambassador Theatre Group (which recently announced a merger with Jujamcyn), is suing its insurer Allianz for Covid coverage. Other major Broadway landlords have not taken such public action against their insurers.

Will any of the theaters or producers ultimately succeed? Only time will tell.



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