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Casino BI lawsuit: insurers hold ground, reject basis for claim

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Chubb and other insurers have again maintained The Star Entertainment Group has no grounds to claim for business interruption (BI) losses it has allegedly suffered because of COVID-19 trading curbs imposed by governments.

In an amended concise statement filed last week, the insurers told the Federal Court that the listed casino operator has “neglected to mention several important facts” to pursue its claim for compensation.

They say The Star referred to other facts “in a manner which is amorphous and infused with unstated assumptions” in its amended concise statement that was filed last month.

Chief Justice James Allsop, who is presiding over the lawsuit, has ordered The Star to submit an amended concise statement, followed by a response from the insurers.

The Star is suing Chubb - the lead insurer of the Industrial Special Risks Insurance Policy - and other insurance partners for breach of contract after they refused to accept its BI claim.

The other insurers who are embroiled in the legal action are AIG, Allianz, Allied World Insurance, Assicurazioni Generali S.P.A, HDI Global, Liberty Mutual, Picc Property and Casualty, Swiss Re International, XL Insurance and Zurich.

According to the insurers’ amended concise statement seen by insuranceNEWS.com.au, the legal grounds advanced by The Star “are misconceived” because they “fail to construe the words ‘loss’ and ‘other catastrophe’ having regard to the policy as a whole and seeking to give effect to every clause”.

They say The Star’s construction of Civil Authority Extension, as provided for in the policy, depends upon the words “other catastrophe” including an international pandemic such as COVID-19.

And it also depends on the word “loss” to include economic loss or, alternatively, the loss of the ability to access or use its premises to conduct its business as intended or as it ordinarily would and/or the loss of custom - none of which involve physical loss, destruction or damage to insured property.

“The Star does this by considering the language of the [Civil Authority Extension] in isolation and giving those terms as broad a meaning as is necessary to encompass the claim made by it under the policy,” the insurers say. “This is plainly contrary to the correct approach to the construction of a commercial contract."

Damage, as defined in “The Indemnity” clause in section 2 of the Civil Authority Extension, refers to physical loss, destruction or damage to buildings or other property used by the insured at the premises for the purposes of the business.

“The Star does not allege that damage of this nature has been suffered,” the insurers say.

The insurers say the words “other catastrophe” are juxtaposed with the word “conflagration” and since the latter is not defined in the policy, it will be given its usual meaning, namely a large and destructive fire which destroys a great deal of land or property.

Therefore the presence of the term “conflagration” gives meaning to the words “other catastrophe” in that they must also be referring to events similar in nature or consequence to a conflagration such as other man made or natural disasters which are sudden and cause widespread physical destruction or damage to property.

“Whatever else this may exclude, it must certainly exclude a global pandemic which is neither sudden nor does it cause widespread physical destruction or damage to property,” the insurers say.

“Otherwise, the words ‘other catastrophes’ would inappropriately extend to figurative meanings such as economic disasters resulting from blockades imposed as a result of distant wars.

“There is nothing in context or commonsense to suggest acceptance of the risk of global or regional disasters.”

The insurers say they were notified of an additional claim - for spoilage - in the amended concise statement lodged by The Star. The claim is being made under Spoilage Indemnity in the Memoranda to Section 1 of the policy.

But the insurers say the allegations “are not admitted” as The Star has not identified the nature or type of stock or merchandise that were said to be lost, destroyed or damaged.

They say The Star also did not list the circumstances by which this unidentified stock or merchandise has experienced deterioration, putrefaction, contamination or changes in temperature within the meaning of the Spoilage Indemnity.