Broadway Theaters Owner Seeks Win In Virus Coverage Fight

By Daphne Zhang
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Law360 (November 18, 2020, 6:32 PM EST) -- The owner of five Broadway theaters asked a New York federal judge to hold that Chubb Ltd. subsidiaries should cover its COVID-19 related losses, arguing that the policy exclusions are ambiguous and do not apply.

Jujamcyn Theaters LLC's five Broadway theaters exhibited popular musicals including "Hadestown," "The Book of Mormon" and "Frozen," and hosted up to 48,000 patrons per week before being ordered to shut down due to the pandemic.

"Virtually every other business and industry can operate in some capacity and generate some revenue. But that is not true for Broadway," the operator said on Tuesday. "No one knows with certainty when Broadway will be permitted to reopen in any capacity."

The theater owner in a bid for a judgment on the pleadings Tuesday said that the terms and exclusions of its "all-risk" policies are ambiguous and that it is entitled to tens of millions of dollars of coverage. Jujamcyn held specialized entertainment insurance and performance disruption policies with Chubb units Federal Insurance Co. and Pacific Indemnity Co., respectively.

Jujamcyn alleged the insurers concluded that its theaters suffered no "physical loss or damage" 10 days after New York City Mayor Bill de Blasio issued an emergency executive order that closed all theaters in the city, stating that "the virus physically is causing property loss and damage."

Federal denied coverage in June, asserting that Jujamcyn's five theaters did not incur property damage as required by a policy, and saying that the policy's "acts or decisions" exclusion bars coverage, according to filings.

"Federal has never articulated how this exclusion unambiguously bars any portion of Jujamcyn's claim by, for example, articulating any excluded 'act' or 'decision' made by anyone at any time," the operator said.

Jujamcyn also cited case law, arguing that courts have viewed such exclusions as "ambiguous because its vague language and an insurer's equally vague interpretation 'leave[s coverage] practically worthless.'"

Federal wrongly denied coverage because its policy does not contain "virus," "pandemic" or bacteria exclusions, the theater owner said. The Federal policy pays up to $63 million for direct physical loss or damage and provides $29 million in civil authority and business income coverage, according to the suit.

"Jujamcyn's loss of the Theaters is neither mental, emotional, nor theoretical," the operator claimed. "Individuals working at the Theaters tested positive, the airspace and surfaces inside the theaters were contaminated and certainly would be again were Jujamcyn permitted to host a theatrical performance of any size."

The performance disruption policy issued by Pacific, meanwhile, insured Jujamcyn for lost income because of the cancellation of shows at the five theaters, with a $250,000 limit for "each loss."

According to the suit filed in August, while Pacific does not dispute that Jujamcyn has suffered a covered disruption, it argued that the losses across all five theaters are subject to a single $250,000 per-loss limit, which it offered to pay. But Jujamcyn says each theater suffered its own separate losses, noting the terms "loss" and "occurrence" are not defined in the policy and Pacific did not insert clearer language that could have supported its stance.

"Virtually every other business and industry can operate in some capacity and generate some revenue. But that is not true for Broadway," the operator said on Tuesday. "No one knows with certainty when Broadway will be permitted to reopen in any capacity."

Counsel for the parties could not be immediately reached for comment on Wednesday. 

Jujamcyn is represented by Jeffrey L. Schulman and Kirk Pasich of Pasich LLP.

Chub units are represented by Barbara Maria Almeida and Daren S. McNally of Clyde & Co US LLP; Philip C. Silverberg of Mound Cotton Wollan & Greengrass

The case is Jujamcyn Theaters LLC v. Federal Ins. Co. et al., case number 1:20-cv-06781, in the U.S. District Court for the Southern District of New York.

--Additional reporting by Jeff Sistrunk. Editing by Michael Watanabe.

For a reprint of this article, please contact reprints@law360.com.

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Case Information

Case Title

Jujamcyn Theaters LLC v. Federal Insurance Company et al


Case Number

1:20-cv-06781

Court

New York Southern

Nature of Suit

Insurance

Judge

Andrew L. Carter, Jr

Date Filed

August 24, 2020

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