Star Entertainment lodges appeal against rebuffed insurance claim

by William Brown Last Updated
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Australian casino operator Star Entertainment has appealed a Federal Court decision that refused its claim for an insurance payout for COVID-19 lockdown related losses.

The Australian Financial Review reports that Chief Justice James Allsop ruled in early August against The Star, which had sought insurance payments for the impact of lockdown restrictions in Sydney, Brisbane and the Gold Coast, where it has casinos.

“The Star cinforms it has filed an appeal,” a spokesman said.

In August 2020, The Star lodged claims with Chubb Insurance, AIG Australia, XL Insurance Company, Zurich Australian Insurance, Allianz, Swisse RE International, Assicurazioni Generali SPA, Liberty Mutual Insurance, HDI Global, Allied World Assurance Company, PICC Property and Casualty Company.

Chubb held 20 per cent of the risk.

The casino group had sought to make claims on its insurance policies.

In Sydney, its limit was $4 billion, on the Gold Coast it was $1.75 billion and $1.43 billion in Brisbane.

Lawyers battle on interpretation of policies

The case was based on the interpretation of a section of the insurance policy under the memorandum heading of civil authority extension, which read: “The word “damage” under section 2 of this policy is extended to include loss resulting from or caused by any lawfully constituted authority in connection with or for the purpose of retarding any conflagration or other catastrophe”.

Justice Allsop said The Star’s argument sought to extend the word damage from physical damage to damage by loss of use or financial loss resulting from various government orders relating to pandemic rules.

“The fundamental difficulty with that distilled simplicity is that it provides cover, without any sub-limit, and so up to $4 billion, for the consequences of government activity in connection with or to retard a catastrophe which itself is not an insured peril. This is not catastrophe insurance,” the judge wrote.

“No provision provides cover for the business consequences brought about by the spread of COVID-19 or by a catastrophe of the spread of any disease. Yet, the construction propounded by Star provides full cover for the business interruption caused by government orders in connection with, or to retard, the catastrophic spread of the disease, notwithstanding that the pandemic, being the posited catastrophe, is not an insured peril.”

Star outlines grounds of insurance appeal

The Star lodged an appeal in early September and believes the original decision was wrong on three grounds, including Justice Allsop’s ruling on the civil authority extension.

“The court…ought to have found that the word ‘loss’ in the civil authority extension includes loss of use, loss of custom and/or financial loss,” the casino operator said in its notice of appeal.

The Star also argues that the interpretation of “other catastrophe” should extend to non-physical loss caused by different shutdowns under COVID-19 health orders.

“Further, ‘other catastrophe’ means an occurrence or event, not a state of affairs, apt to cause physical loss or destruction of or damage to property and is not apt to refer to, or encompass, and does not reach to include a pandemic of disease,” Justice Allsop wrote.

Macquarie analysts predicted when the lawsuit was filed that it would be very difficult for Star Entertainment to get a positive ruling from the courts.

Star wasn’t the only casino operator to file such a claim as there were also casino operators in America who were filing insurance claims asking for reimbursement based on the business interruption policy.

Chief Justice Allsop ruled against Star Entertainment and said that after going through the operator’s special risk policy there was nothing there to cover financial losses from a government shutdown.

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