An insurer’s denial of indemnity for costs arising from the cancellation of a music festival was upheld by the Federal Court of Australia.
In issue
- In this case, the Applicant sought indemnity pursuant to an Event Cancellation insurance policy (Policy) for the cancellation of a festival known as 'Subsonic Music' (Festival). Insurers denied cover under the Policy. The primary issue for determination by the Federal Court of Australia was whether the cancellation of the Festival was:
- necessary; and
- the sole and direct result of a cause:
- not otherwise excluded by the Policy; and
- beyond the control of the applicant and the participants (as defined by the Policy).
The background
The Applicant in the proceeding contended that the 2019 Festival was cancelled because of bushfires which were burning in the mid north coast region of New South Wales (or alternatively as a result of extreme weather conditions, being drought conditions affecting the area).
However, the evidence established that:
- In the months prior to the Festival, the Applicant had sought to increase the capacity of the Festival from 5,000 to 10,000 patrons;
- The Applicant required development approval (DA) to increase the capacity of the Festival;
- Two weeks prior to the proposed Festival, the Council gave approval for the Festival to proceed (with the reduced capacity) and with certain conditions; and
- At the time the DA was received, the venue host had unsuccessfully attempted to source a suitable alternative venue for a larger crowd capacity.
The decision at trial
Ultimately, the Federal Court of Australia found neither the bushfires nor the drought conditions were the real reason the Applicant decided to cancel the festival. It determined that the onerous conditions proposed by the Council and the Applicant’s belief that it did not have enough time to satisfy those conditions were the real reasons the Festival was cancelled. As a result, the Federal Court of Australia ruled that the insuring clause was not engaged because there was not a 'necessary cancellation' of the event and the causes of cancellation were excluded under the policy and the respondent insurers were not liable to indemnify the Applicant for the loss incurred following the cancellation of the Festival. The Federal Court of Australia also rejected the Applicant’s reliance on section 54 of the Insurance Contracts Act 1984 (Cth) and clarified the circumstances under which this section may be invoked against insurers.
The claim for indemnity failed.
Implications
This case highlights the need for insurers to clearly define the terms and conditions of their policies and illustrates how doing so can reduce the circumstances in which indemnity is required to be provided for claims. The case also demonstrates the role of exclusion clauses in limiting an insurer's liability.
