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Axed music festival avoids policy exclusion by a few days

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Allianz has lost a claim dispute after an event organiser reluctantly cancelled a Sydney weekend music festival on the direction of the local council days before a COVID lockdown came into effect.

On Friday March 13 last year, the festival was set up and ready to take place the next day when the Australian Government announced all non-essential organised gatherings of more than 500 persons be scrapped to limit the spread of COVID-19. It was effective from the following Monday.

The Australian Financial Complaints Authority (AFCA) ruled that the festival’s cancellation late on the Friday was “beyond the control of the complainant” and Allianz must settle the claim, even though its policy had a communicable disease exclusion.

“The exclusion does not apply to defeat the complainant’s claim,” AFCA ruled. “If the cancellation occurred on (Monday) March 16 2020 the outcome may be different. It did not. It occurred prior to the imposition of the government restrictions.”

The organiser’s Allianz Event Cancellation policy took effect in mid February 2020 and covered six planned music festivals scheduled until late April 2020.

It claimed after incurring an estimated $881,873 in expenses related to the cancelled festival and no income. Had it gone ahead, it would have been open to prosecution and its public liability insurance would have been void, it argued.

Allianz declined the claim, saying there was no actual restriction in place and the communicable disease exclusion applied.

AFCA ruled against this, saying the cancellation was necessary due to “a sudden and accidental cause,” which the policy covered.

At 3.30pm on Friday March 13 2020, the afternoon before the festival date, the organiser received a call from Northern Beaches Council – the land holder of the planned festival site - instructing that the event be cancelled in light of the government’s announcement that day and in the interest of community safety.

The event manager said he advised the Council during the phone call that cancellation was not possible and questioned the request, given the restrictions on large gatherings were not yet in force. Less than two hours later, a second phone call was received advising him that the Council had decided to cancel the event.

The manager asked if there was anything that could be done to ensure the festival went ahead but was told the Council’s decision was final and every event across the shire was cancelled.

A Council email stated “whilst the restriction on non-essential events over 500 may not be effective until Monday, Council feels this is the safest option for the community and all stakeholders”.

The organiser accordingly announced the event was cancelled later that evening.

AFCA said it was “satisfied the reason for the cancellation of the festival was necessary and was from a sudden and accidental cause which occurred within the policy period”.

“While there was no legal requirement imposed by the government, the insuring clause does not require the cancellation to be legally ordered. The relevant clause requires the cancellation to be necessary because of a sudden and accidental cause,” the ruling states.

“It is clear Northern Beaches Council was instructing the complainant to cancel the event as the land holder, rather than simply requesting the cancellation,” it said. “The instruction came through at 5.20pm on March 13 2020 requiring the cancellation of the event the following day. It was sudden and unexpected.”

Allianz had argued that the action of cancelling the event was intentional as the outcome was known and therefore was not accidental.

“The panel does not agree with this interpretation,” AFCA said. “It was unexpected and unintentional. It was beyond the control of the complainant.”

Allianz said no insuring clause was triggered as the Council only requested the event be cancelled and so the cause was the festival organiser’s deliberate action – or if that was deemed not to be the case then the cause was instead the outbreak of COVID-19, a known event prior the policy commencement.

AFCA accepted the Council’s decision was “premature” and triggered by COVID but said the festival organiser had no choice than to abide.

Allianz was also ordered to pay $5,000 towards legal costs.

See the full ruling here.