Broadway Theater Operator Attempts to Recoup from Insurer Monies Lost During COVID-19 Shutdowns

Thanks to state-mandated shutdowns, the show must not go on. To combat COVID losses, one theater operator has turned to its insurer.
By: | October 4, 2020

On March 12, a statewide order in New York prohibited gatherings of more than 500 people, effectively shutting down all 41 Broadway theaters in NYC. One operator, Jujamcyn Theaters, which operates five Broadway houses, balked.

Its successful musicals, “Hadestown,” “Moulin Rouge: The Musical” and Disney’s “Frozen” all had to cease production during the growing COVID-19 pandemic. By July, Jujamcyn estimated it might be in line to lose $29 million in box office revenue by year’s end.

It looked to its insurers for restitution.

Covered under a business income loss policy through Federal Insurance Company, Jujamcyn filed a claim. But the theater was soon denied.

Under a second policy through Pacific Indemnity Company, Jujamcyn tried again. This time, the theater operator received what it felt was a fraction of what it was owed.

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It has since filed suit.

In the lawsuit, Jujamcyn argues that the coronavirus pandemic has indeed caused its theaters physical losses and/or damages due to the fact that the virus can adhere to surfaces for days and linger in the air inside its buildings.

Many in the art and entertainment industry are being met with similar fates. Though a building may be shutdown and revenue streams placed on indefinite hiatus, because there is no actual physical loss to the building business interruption and similar policies are not kicking in.

Still, across the country, these businesses are fighting tooth and nail for coverage during unprecedented financial loss.

“[Insurers have] seized upon excuses to abandon its insured in its time of need,” Jujamcyn’s lawyer, Jeffrey L. Schulman, wrote about the current suit.

“We are currently paying claims for pandemic-related losses in workers’ compensation, travel insurance, credit-related products as well as certain business interruption coverage where direct physical loss to the property is not required. This includes millions of dollars in claims paid for Broadway show performance disruption,” said a spokesperson for Chubb, the parent company of the Federal Insurance Co.

“The vast majority of standard property polices, however, do not cover business interruption from pandemic risk, which would create infinite exposure for the insurance industry if applied to all policies. Creating false expectations about coverage that does not exist, including filing baseless lawsuits, will not solve this crisis.”

Scorecard: This suit is in its early stages, but it is not alone. As businesses grapple with the pandemic, so too will insurers with growing business interruption-related litigation.

Takeaway: Now is the time for insurance companies to reflect on the best next steps moving forward. If another Black Swan-esque pandemic were to arise, can the industry continue to hold out? Or will the courts have to decide? &

Autumn Heisler Demberger is the content strategist at Risk & Insurance®. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]