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SXSW loses court action against insurer

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South By Southwest (SXSW) has lost a court action against its insurer over who should cover its legal costs in relation to a class action lawsuit over its cancellation in 2020.

District Judge Robert Pitman concluded that Federal Insurance Co is not required to cover the costs that the Texas-based festival incurred when dealing with the case, which was brought about by ticket-holders who wanted a refund rather than deferment to attend the event in 2021, 2022 or 2023.

The class action was settled in 2021, but that brought about the second case between SXSW and its insurer. Federal argued that it should not foot legal costs as SXSW’s insurance policy had a professional services exclusion. SXSW argued that the insurer was employing an “overboard interpretation” of that particular exclusion in its $1m policy.

Magistrate Susan Hightower sided with the insurance firm in a May ruling, and Pitman has now accepted her recommendations.

Pitman ruled: “On this date, the court adopted US magistrate judge Susan Hightower’s report and recommendation concerning plaintiff SXSW LLC’s motion for partial summary judgment and defendant Federal Insurance Company’s motion for summary judgment. The court’s order denied SXSW’s partial motion for summary judgment, and granted Federal’s motion for summary judgment. The court dismissed SXSW’s claims,”

The SXSW music conference and showcase festival was one of the first major music events to cancel as the COVID pandemic first started to spike in the US back in 2020.

While around 80% of ticket-holders were happy to defer, its inflexible no-refund policy – “SXSW does not issue refunds under any circumstances” – very soon came under legal scrutiny. An initial complaint, filed by Maria Bromley and Kleber Pauta in a Texas Federal Court, claimed breach of contract and unjust enrichment and sought refunds and damages for any ticketholders.

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