Hollywood is not off to a great start for the month of August. Kanye West’s touring company, Very Good Touring, Inc. (“Very Good”), sued insurance company Lloyd’s of London (“Lloyd’s”) on Tuesday in California federal court for withholding almost $10 million in coverage for the shows on West’s “Life of Pablo” Tour that were canceled due to West’s health condition. In Very Good Touring, Inc. v. Cathedral Syndicate, et al., No. 2:17-cv-05693 (C.D. Cal. filed Aug. 1, 2017), the touring company characterized Lloyd’s delay in providing a coverage opinion as “emblematic of a broader modus operandi of the insurers of never-ending post-claim underwriting where the insurers hunt for some contrived excuse not to pay.”
Very Good planned West’s Saint Pablo Tour, consisting of over 38 performances, and purchased non-appearance and cancellation insurance policies from Lloyd’s to protect against the financial losses associated with canceling a tour and West being unable to perform during the tour. In November 2016, West became ill and was hospitalized. As a consequence, West made the ultimate decision to cancel the remainder of the tour. Very Good issued full refunds for all tickets for the cancelled shows, and incurred other associated expenses.
Very Good alleges that it tendered its losses to Lloyd’s shortly after West’s hospitalization and fully cooperated through all stages of Lloyd’s lengthy investigation of the claim. For example, Lloyd’s hired an “Independent Medical Examination” doctor to examine West once he was released from the hospital, who confirmed that West was in no condition to resume his tour. Additionally, West, along with at least eleven other affiliates of West and Very Good, were required to undergo examinations under oath demanding hours of sworn testimony.
Nearly nine months passed, and Lloyd’s allegedly failed to issue any type of coverage decision. Very Good claims that it had received nothing more than a suggestion that Lloyd’s may deny coverage based on the unsupported contention that West’s use of marijuana caused his medical condition. Consequently, Very Good brought suit asserting claims of breach of contract and breach of the implied covenant of good faith and fair dealing, and alleging that Lloyd’s owes them almost $10 million in coverage. Very Good further alleges that Lloyd’s failure to timely accept coverage under the policies was, and still is, unreasonable and in bad faith because Very Good, West, and other affiliates have been forced to endure an invasive, and prolonged, investigation as part of Lloyd’s effort to find a reason to deny the claim.
Artists and touring companies face a substantial risk of large financial losses if something goes wrong during an artist’s tour and performances need to be canceled. Event-cancellation insurance is designed to protect such companies from financial losses resulting from cancellation, interruption, postponement, or even reduced attendance at a covered event. Additionally, other forms of insurance are available to help minimize these and similar risks faced by entertainment companies. For example, terrorism insurance can cover losses resulting from a terrorist attack—including expenses related to hiring additional security, storing or moving equipment, and even food or lodging for vendors traveling with the artist. Business interruption and commercial property insurance options may also be available when performances are cancelled due to weather conditions, power outages or other covered causes of loss.
As Very Good’s experience illustrates, even for covered claims, insurers may unreasonably prolong their investigation of the policyholder’s claim in an attempt to conjure a reason to deny coverage under the policy, or to simply defeat or reduce the claim through compromise due to policyholder attrition (as prolonged investigations often become incredibly invasive and extremely costly). Touring companies, record labels, and entertainment firms should refer to experienced insurance recovery counsel to assist in developing strategies for minimizing financial risk before a cancellation occurs, as well as for presenting claims to insurers after-the-fact in order to maximize an insurance recovery—including potentially litigating against insurers when tactics like those in Very Good’s case are employed.