A court has delivered Melbourne theatres a partial business interruption insurance victory after shows including Harry Potter and the Cursed Child and Billy Elliot the Musical were closed during the pandemic. 

Victorian Supreme Court judge Justice Michael Osborne yesterday found theatre owner the Marriner Group was covered by an extension in an Ansvar Insurance policy, but the amount was limited to about $2.8 million due to sublimits.

Venues including the Princess Theatre, Regent, Comedy Theatre, Forum and Plaza Ballroom had sought cover for pandemic losses totalling $20.4 million under two policy periods. 

Ansvar says it is reviewing the decision while Elit Lawyers, representing the theatres, has welcomed the outcome.

“Given the insurer sought to exclude cover entirely under the policy and argued that at best a cap of $500,000 applied for each of the two periods of insurance, the Marriner Group is very pleased with the recent decision,” Elit Lawyers MD Danielle Snell told insuranceNEWS.com.au today. 

The closures followed government directions and associated advice that led to trading restrictions during the covid pandemic. 

The theatre group’s policy wording required “closure of the whole or part of the premises by order of or in consultation with or upon advice from a statutory or government authority following” a disease outbreak within 25 kilometres. The policy had an exclusion citing the repealed Quarantine Act. 

The insurer argued the word “following” should be read as “as a result of”, and pointed to the business interruption test case, where Swiss Re won against Sydney laser therapy clinic LCA Marrickville with a policy containing “as a result” wording. 

Justice Osborne said when parties use different words “one would expect that the words so chosen would have different meanings”, particularly in different contexts. 

He also looked to the UK Financial Conduct Authority versus Arch test case. 

“Nothing in FCA v Arch precludes a temporal construction being given to ‘following’ or, more pertinently, requires the conclusion that ‘following’ must have the same causal connection as ‘as a result of’,” he said. 

Ansvar also argued the decision to shut was made before a March 16 2020 Victorian announcement, and density quotas and caps on patrons who could attend venues of 100 people or more did not require closure. 

The court heard that by March 15 show producers had either cancelled or suspended performances and had informed Marriner, which assessed it was uneconomic for the theatres to operate with an audience cap of 500 people.

Justice Osborne said prime minister’s statements on March 13 and 15 made clear the head of the Commonwealth government – speaking on behalf of the Council of Australian Governments and then the newly formed National Cabinet – was providing advice to non-essential businesses not to open in circumstances where than more than 500 people could be present. 

“Having regard to the nature of the Marriner Group’s businesses, therefore, this amounted to advice in substance to the effect that the venues could not operate and therefore had to close,” Justice Osborne said. “The advice was provided after the [covid] outbreak in the City of Boroondara and after the first case of community transmission had occurred in Victoria. The content of the advice and its proximity in time to the outbreaks is sufficient to establish that the advice followed the outbreak within the meaning of the [policy] extension.” 

Justice Osborne rejected Ansvar’s submission that an exclusion citing the Quarantine Act should be rectified to read as the Biosecurity Act because both parties had a “common intention” that it meant the latter legislation. 

The insurer argued an aggregate $500,000 sublimit for the policy periods meant any liability to the Marriner Group should be capped at $1 million. 

The Marriner Group argued the sublimit applied only to the infectious diseases clause, and not to the extension, but if it was found to apply, then it should be applied to each venue and not as a total cap. 

Justice Osborne found the $500,000 sublimit applied “in each relevant period of insurance with respect to each of the four venues”, with the Regent and Plaza Ballroom counted as one because they operate from the same Collins Street address. 

“The indemnifiable loss is $816,005 for the period of insurance for the first policy and $2 million for the period of insurance for the second policy, subject to payment of any excess,” he said. 

The decision is available here.

From Insurance News magazine: A long-running and ‘vastly significant’ battle over contract terms is set to rumble on in the courts