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The Effect of COVID-19 on The Music Industry and Recent Case Law

Author: Robert Bernstein

Guest Editor: Kiran Gupta

Related Articles: COVID-19, California

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April 2, 2021 9:00am

While the streaming of recorded music remains healthy, live music venues, musicians, and those who support them have been hard hit by the COVID-19 pandemic. Restaurants may survive by offering food to go and in some instances outdoor seating, but a concert cannot be packaged to take home, and it is not practical to perform outdoors for small groups, even when weather and noise are not concerns. Following are summaries of two recent music industry decisions, one a win for an insurer and one a win for a concertgoer. A third ongoing case involving a dispute with an insurer over a canceled music tour is also discussed.

Concertgoers’ Injury Suit Gets an Encore

Gregory Maiden (“Maiden”) attended a soul music festival at the Valley View Casino Center (formerly the Sports Arena) in San Diego on April 9, 2016. While at the concert, he fell on the stairs when returning to his seat and was injured. He sued the venue’s owner, AEG Management (“AEG”) in San Diego Superior Court to recover damages related to injuries sustained in the fall. Maiden’s civil engineering expert opined the venue was negligent and violated a building code provision by failing to provide a handrail. Maiden and his expert asserted the lack of a stairway constituted a dangerous condition.

AEG moved for summary judgment, contending the stairway was clean, the stairway had no spills at the time of his fall, and Maiden was successfully able to negotiate similar portions of the stairway without incident. AEG also asserted Maiden’s expert relied on the wrong building code provision and failed to account for an exception to the handrail requirement, which applies to stairways through “reviewing stands, grandstands, and bleachers.”

The trial court judge sustained AEG’s objection to the expert’s testimony, finding he indeed relied on the wrong code provision. The judge also concluded Maiden could not defeat the motion for summary judgment because he alleged only a dangerous condition of the stairway and not specifically the absence of stair rails. As a result, the Court granted AEG’s motion.

On appeal before California’s Fourth District Court of Appeal, Division One, a three-judge panel reversed the trial court. The Appellate Court ruled a factual dispute over the nature of the seating area was improperly resolved by the trial judge. It also found the trial judge read the declaration of Maiden’s expert too narrowly and concluded the expert’s opinions regarding the absence of a handrail could reasonably support a claim of general negligence and not merely a discrete statutory violation. The Court of Appeal reversed the trial judgment, ordered summary judgment for AEG, and denied and remanded the case to the trial court, providing Maiden with an “encore” to his lawsuit.

Vigilant Insurance Prevails Over Concert Promoter in COVID-19 Coverage Suit

Another Planet Entertainment (“Another Planet”) operates music venues in Berkley, San Francisco, Oakland, California, and Lake Tahoe, Nevada. It purchased entertainment insurance from Vigilant Insurance Co. (“Vigilant”), a unit of Chubb, Ltd. After Vigilant denied a claim, Another Planet sued in Federal Court, Northern District of California, seeking to compel coverage for losses arising out of venue closures related to the COVID-19 pandemic.

Another Planet asserted in its complaint it suffered physical loss and damage at its venues due to the presence of the COVID-19 virus. Vigilant moved to dismiss the complaint, arguing Another Planet could not prove the virus itself caused property damage that would be covered under the policy and the venues were instead closed due to public health orders.

In granting Vigilant’s motion to dismiss, U.S. District Judge Vince Girdhari Chhabria held it was “unknowable” whether the virus was in fact present on surfaces at the venues when they were closed. He agreed with Vigilant the venues closed due to government orders designed to curb the spread of COVID -19 in the community, and not because the virus was detected in the buildings. Judge Chhabria wrote if Another Planet established multiple employees tested positive and venues were shuttered while undergoing thorough cleaning and sanitizing, it could have alleged damage and physical loss, similar to a chemical contamination, raising the possibility of coverage and allowing the lawsuit to proceed. Because government orders closed the venues, and absent proof by Another Planet the virus was present in the venues, the Judge determined Another Planet failed to properly allege coverage under Vigilant’s policy and dismissed the case. Although the Judge provided Another Planet with an opportunity to amend its complaint, there is no indication it was able to do so successfully and Vigilant appears to have prevailed in the case. Under these circumstances, government orders shutting down concert venues due to COVID-19 were deemed insufficient to trigger coverage for property damage.

The Chicks Sue Over Cancelled Concerts

The Chicks (formerly The Dixie Chicks) are country music superstars who survived a boycott following criticism of U.S. foreign policy almost 20 years ago. They reclaimed a large fan base after the criticism and released music which climbs the charts. They were primed to follow a new album with a three-month, 48 city tour – their first tour in 14 years – in 2020. Despite efforts to work around COVID-19 restrictions, reschedule dates, and entice fans to leave their homes and gather in public, The Chicks were compelled to cancel the tour.

The Chicks’ touring company, Tunashoes Tours Inc. (“Tunashoes”), tendered a claim to underwriters at Certain Underwriters at Lloyds London (“Lloyd’s”), which insured the tour. Tunashoes claimed Lloyd’s response was an endless series of mainly irrelevant questions and delayed decisions. Tunashoes sued Lloyds in the Los Angeles Superior Court for breach of contract and bad faith, seeking to compel coverage for the cancelled tour. The complaint alleges suggestions from Lloyds would not come close to making up for the income which would be generated by 48 well-attended shows. The Chicks assert playing open-air festivals with limited audiences or online streaming shows, as Lloyds recommended, “would only exacerbate, rather than diminish, any loss,” and they characterize proposed substitute performances as the equivalent of holding “car washes.” Even with the rollout of vaccines and some progress against the pandemic, The Chicks allege venues are not likely to open at anything close to full capacity through 2021. Their lawsuit is presently pending in the Los Angeles Superior Court.

Takeaway

Despite restrictions on public gatherings and in-person appearances, courts continue to do business and move cases forward, albeit with more delays than before the pandemic. As shown in the Maiden decision, courts continue to interpret allegations through a generous lens and prefer to allow claimants to have their day in court whenever material facts and issues are disputed. The extent to which business interruption or property damage coverage will be triggered by COVID-19 is presently unknown but early indicators show insurers are, for the most part, successfully denying such claims.

Robert G. Bernstein is Senior Counsel with Tyson & Mendes.

 

i. Shawn Rice, Chicks’ Tour Co. Sues Lloyd’s For $7M Over Canceled Shows, LAW360 (Mar. 26, 2021, 12:48 PM), https://www.law360.com/articles/1361061/chicks-tour-co-sues-lloyd-s-for-7m-over-canceled-shows.

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