In this Australian judgment Commens t/as Subsonic Music v Certain Lloyd’s Underwriters subscribing to Policy No ALTCNX1900332 (Trial Judgment) [2024] FCA 434 the question for determination was whether the insurer’s music festival cancellation was necessary and the sole and direct result of a cause not otherwise excluded.  The policy defined “cancellation” as the “inability to commence with the event”.

Whether there was a “necessary cancellation” involved both the objective question as to whether the relevant cause meant it was necessary to decide not to commence with the event, and the subjective question whether that cause was the ground actually used in making that decision. 

Even if there had been a “necessary cancellation” the further question arose whether the necessary cancellation was the “sole and direct” result of a cause not otherwise excluded occurring at the time of the decision and beyond the control of the insured and the participants. 

The insureds suggested that the cancellation was because of bushfires. 

On a review of all the evidence the court held that on the relevant dates and certainly at any time before the festival was due to commence there was, as a matter of objective fact, no inability to commence with the event nor a necessity to make the decision not to commence with the event by reason of bushfires or drought. 

Although the risk of bushfires may have contributed to the timing of the decision to cancel the festival the decision would probably have been made in any event.  The actual reason for the decision was the fact that it had been decided to cancel the event and a suitable alternative venue could not be found.  The reasons for the decision to cancel the event was the onerous and late imposition of conditions by the council.

The insurer also relied on an exclusion of loss directly or indirectly arising out of, contributed to or by, or resulting from a failure to make all “necessary arrangements” and to obtain “all necessary authorisations” in a timely manner.  The court found that the insured had failed to conduct itself in a timely or prudent manner. 

The claim was also excluded by reason of the refusal of the venue’s host to allow the event to be conducted on the relevant property. 

The insurers had no liability to reimburse the insured for any loss occurred following cancellation of the music festival.  The judgment is worth a close read by all insurance parties involved in cancellation insurance.