Business interruption insurance claims keep coming, cutting across a broad array of industries. The entertainment and media sectors are certainly not immune from pandemic-related losses. Last month, ViacomCBS became the latest entertainment entity to file such a claim, suing its insurer, Great Divide Insurance Co., for breach of contract and breach of the implied covenant of good faith and fair dealing. In the suit, filed in the U.S. District Court for the Central District of California, ViacomCBS seeks damages and declaratory relief for what it alleges is the insurance company’s failure to cover losses on ViacomCBS’ Television Production Portfolio policy, which provides more than $55 million in production-related coverage of various types. The lawsuit cites losses related to canceled and delayed productions and live events, such as the Kids’ Choice Awards, which was delayed and ultimately aired virtually, as were many other productions during the early months of the pandemic. ViacomCBS accuses its insurer of interpreting the governing policy in “an overly narrow and wrongful manner” and refusing to acknowledge coverage for various losses while improperly limiting the coverage available for other losses. ViacomCBS also alleges that Great Divide has acted in a manner inconsistent with policy language and industry custom and practice by refusing to acknowledge that ViacomCBS is “entitled to a third annual period of coverage without modification of the policy wording or cancellation or reduction of any of the policy’s coverages, except rate revision, as necessary.” It asserts that the insurer has instead offered only to continue the policy if the parties agree to an addition of an exclusion applicable to losses relating to COVID-19.
In its complaint, ViacomCBS argues forcefully that Great Divide should be held liable because Great Divide and other insurers like it were “repeatedly warned” over the years about the potential impact of pandemics. For this reason and others, ViacomCBS contends, Great Divide either knew or should have known that its policies could be held to cover losses associated with the presence of a virus. ViacomCBS also cites a 1962 California Court of Appeal case interpreting the “direct physical loss” provision of the contrary and finding that a property insurance policy could cover loss or damage to a structure that had no physical damage or alteration.
The entertainment giant argues that in 2006, shortly after the outbreak of SARS, the insurance industry undertook to draft exclusions applicable to losses from viruses and bacteria, which was ultimately promulgated by the ISO (Insurance Services Office). Nevertheless, Great Divide chose to sell insurance to ViacomCBS without such an exclusion. On this basis as well, ViacomCBS argues that it is entitled to indemnification of its losses under a number of coverages (“Cast”, Extra Expense”, “Civil and Military”, “Imminent Peril”, and “Ingress/Egress” coverages).
With major losses resulting from delayed and closed TV and movie productions, closures of movie theaters, and cancellation of live performances, many entertainment and media industry players and observers will be watching this case closely.