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Emerald Holding, Inc. v. W.R. Berkley Syndicate Limited and Great Lakes Insurance SE US District Court – Central District of CA; Case No. 8:21-CV-00340 

Emerald Holding Inc. (“Emerald”), a leading operator of business-to-business trade show events across the United States, has suffered millions of dollars in losses from canceled or postponed in-person events in order to comply with health and safety government mandates due to the Coronavirus pandemic.  

Fortunately for Emerald, it purchased two broad Convention Cancellation Policies from Lloyd’s of London (“Lloyd’s), with Berkley Syndicate Ltd. and Great Lakes Insurance SE insuring and subscribing to the same (collectively, the “Underwriters”). One policy purchased in April 2018 covers events scheduled during 2020, and the policy commencing in March 2019 covers events scheduled during 2021. Both policies cover losses from cancellation, curtailment, postponement, removal to alternative premises, abandonment, or enforced reduced attendance of an event. Notably, both policies expressly provide coverage for cancellations and other losses “arising from an outbreak of communicable disease.”  

Unfortunately, according to Emerald, the Underwriters are now refusing to pay. Emerald provided timely notice under the Policies and began submitting claims as events were canceled. Emerald maintains that the Underwriters were responsive at first, and the claims were promptly accepted, adjusted, and paid nearly in full. The Underwriters allegedly have already paid over $100 million of Emerald’s canceled events claims. However, as the damages continue to accumulate due to event cancellations or postponements, the Underwriters have changed their approach, forcing Emerald to file suit over an additional $100 million still owed in cancellation claims under the policies. The Policies are subject to total aggregate limits of $191,124,000 for the 2020 policy and $191,472,824 for the 2021 policy.

Emerald filed suit on February 22, 2021, alleging that the Underwriters have become increasingly nonresponsive and obstructive in their attempts to delay or reduce further payments. Specifically, Emerald alleges that the Underwriters have engaged in delay tactics that include pretending not to have received information, prolonging investigations, raising new and unreasonable issues, and refusing basic information requests. Emerald also asserts that the Underwriters have improperly denied coverage for events they say should not have been canceled at all, even though cancellation was unavoidable amidst the pandemic. Emerald further claims that the Underwriters hired a law firm to act as outside coverage counsel. Instead, it is acting as a claims adjuster in a routine claims handling capacity and implementing new claims “protocols” and reporting requirements that have further delayed the adjustment and payment process.  

Perhaps one of the more interesting aspects of this case is that Emerald alleges that the Underwriters improperly tried to coerce Emerald to change the 2021 policy terms after inception of the policy. As the 2021 policy was issued back in 2019, pre-pandemic, the Underwriters, through new adjusters, have allegedly refused payment of any claim under the 2021 policy until Emerald agrees to an endorsement with “updated” revenue amounts for 2021. This would essentially change the pre-pandemic revenues to become mid-pandemic revenue numbers, significantly reducing the promised coverage.  

Emerald’s suit contains three causes of action. The first count seeks a judicial declaration confirming that under the policies, Emerald is entitled to payment for specific losses associated with certain events; that the Underwriters cannot use corporate overhead savings to reduce the amount of coverage owed; that the Underwriters must adjust the claims based on pre-pandemic anticipated revenues; that the Underwriters cannot require modification to the 2021 policy as a pre-requisite to paying the claims; that the Underwriters’ denial of coverage is improper; that the Underwriters are obligated to provide coverage to Emerald for future marketing expenses for covered events; and that the Underwriters are obligated to provide timely and regular payment for coverage claims according to a reasonable protocol determined by the Court. The second cause of action asserts a breach of contract claim for which Emerald seeks compensatory damages in the amount of all unpaid portions of the covered claims.The third count is a bad faith claim based on the alleged unreasonable delays, reduction, and avoidance of the insurers’ obligations under the policies without good cause. In connection with this claim, Emerald asserts that the insurers have improperly put their own financial interests above the interests of their insured. Emerald seeks attorneys’ fees, and special economic and consequential damages.

As of February 24, 2021, the Court has directed the parties to participate in the Alternative Dispute Resolution (ADR) program.

SDV will continue to monitor this case and provide updates as it progresses. This case could potentially impact insurers’ ability to “modify” their policies after they’ve been issued, as well as guidance regarding proper claims handling procedures for event cancellation. For more information contact Jeffrey J. Vita at JVita@sdvlaw.com or Stephanie A. Giagnorio at SGiagnorio@sdvlaw.com. 

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