Theater Owner and Insurer Agree to Drop Litigation over COVID Claims

An owner of Broadway theaters and Pacific Indemnity Insurance Co. have voluntarily agreed to end their remaining litigation over COVID-19 coverage claims.

Under the stipulation filed May 11, each party will bear its own attorneys’ fees and other costs.

The dismissal came after a March ruling by a New York federal judge kept open the Jujamcyn Theater claim against Pacific Indemnity due to ambiguous policy language as to whether the theater suffered one loss or multiple losses at its five theaters under a performance disruption policy.

That same March ruling dismissed all similar COVID business loss claims against Federal Insurance Co., which issued Jujamcyn an “all-risk” property policy, because Jujamcyn failed to show its losses resulted from “direct physical loss or damage” and that are “the direct result of direct physical loss or damage to property.”

The dismissal does not indicate whether the ambiguity in the Pacific performance disruption policy language was resolved or if Jujamcyn Theater received additional payments. Attorneys for the parties did not respond to inquiries by press time.

Jujamcyn is one of the largest Broadway theater owners in New York and owns and operates five theaters: the St. James Theatre; the Al Hirschfeld Theatre; the Walter Kerr Theatre; the Eugene O’Neill Theatre; and the August Wilson Theatre. Each of its theaters was closed for periods and lost business during the pandemic.

Jujamcyn Theaters sued Federal Insurance and Pacific Indemnity Co., both members of the Chubb group, that issued separate policies to Jujamcyn, over COVID-19 business loss claims.

While Judge Andrew Carter Jr. of the southern district of New York dismissed all claims against Federal in March, he continued the case for claims under Pacific’s performance disruption policy. This policy insures income loss due to the “necessary cancellation, interruption or postponement of performances, including the inability to open a new production as scheduled and any ‘extra expense’ due to the actual or potential cancellation, interruption, postponement or other impairment of one or more of performances.”

Under the policy, the loss is covered provided it is “caused by or results from a covered occurrence,” which is defined as “any unexpected circumstances beyond the insured’s control,” except for some exclusions.

The Pacific policy limit of liability is $250,000 for each loss caused by an occurrence.

Pacific never tendered a claim denial to Jujamcyn; rather it paid the amount it thought was owed pursuant to the policy, a single claim payment of $250,000 based on its interpretation of “limit of liability” due under the policy. Pacific argued that the definition of “loss” is coterminous with “occurrence” and thus because COVID-19 constituted a single “occurrence” under the policy, Jujamcyn only suffered one “loss.”

Jujamcyn balked, maintaining that the closure of its five theaters each represented a “loss” for which it was owed five payments of $250,000 each.

Judge Carter rejected the argument that the COVID-19 pandemic is only a single occurrence for insurance coverage purposes. He also determined that the policy language is ambiguous.

The court found that the essential term at issue — “loss” — was undefined. The judge said one reasonable interpretation of “loss” is that Jujamcyn suffered five losses when each of its five theaters suffered performance disruptions. This would be consistent with the stated “limit of liability” which specifies that $250,000 may be paid out for “each loss” caused by a “covered occurrence.”

However, the judge continued, another reasonable interpretation of “loss” is that Jujamcyn— the sole entity insured under the contract—suffered a singular loss as a result of the closures of its theaters, caused by the single “occurrence” of the COVID-19 pandemic.

“Neither interpretation is clearly compelled by the plain language of the contract,” Judge Carter concluded.