Chubb unit must cover SXSW class-action defense, settlement

The 5th Circuit U.S. Court of Appeals Thursday reversed a Chubb Ltd. unit’s win against SXSW LLC over the defense and coverage of a more than $1 million settlement to resolve a class action over the cancellation of the Austin, Texas-based music festival South by Southwest in 2020.

The three-judge appeals court panel, in SXSW LLC v. Federal Insurance Co., disagreed with the trial judge’s finding that a contract exclusion and a professional services exclusion in SXSW’s policy from Federal barred coverage.

Two ticket holders sued the music festival host in April 2020 after it refused to refund their ticket costs after the event was canceled due to the COVID-19 pandemic. The lead plaintiffs asserted claims for breach of contract, unjust enrichment and conversion. The suit was settled in February 2022, court records show.

SXSW sued Federal in October 2021 after it refused to defend it against the suit. The parties each filed summary judgment motions, and the trial judge ruled that while the class action sought a covered loss, exclusions in the Chubb unit’s policy barred coverage.

In reversing the trial judge’s decision, the appeals court panel concluded that the contract exclusion did not apply because the class-action plaintiffs’ claims were not limited to SXSW’s purchase agreement.  The panel also found that the professional services exclusion was inapplicable because the festival host’s refunding of tickets is not a professional service.   

Representatives for the parties did not respond to requests for comment.